Wednesday, 2 August 2017

Key Issues & Concerns as Kenya & Rwanda Head to Polls

Image: Courtesy

Two member states of the East African Community (EAC), Rwanda and Kenya will be holding their elections four days apart this month. Rwanda is expected to kick-start the exercise on Friday August 4th while Kenya will be conducting the general election on Tuesday August 8th.

These two polities have similarities and differences socially, economically and politically. Rwanda’s political environment is perceived to be authoritative with President Paul Kagame viewed as a political leader bearing dictatorial tendencies. On the other hand, Kenya’s political landscape is considered to be democratic.

One of the contemporary challenges that African states face is neo-colonialism. Political neo-colonialism manifests itself in the nagging manner in which Western states and non-state actors, intellectuals and the academic establishment direct African nations to adopt the system of democracy and its principles.

This has resulted in the mushrooming of Western democratic franchises in Africa which do not embrace the existing socio-political and economic conditions of the continent. To me, the Rwandese people are not led by a despot as claimed by most of the Western world entities. They have only adopted a system that suits their local conditions.

Considered to be one of the democratic models in Africa with democratic institutions, Kenya is also well-known in the world when it comes to corruption. The Corruption Perception Index released by Transparency International in January 2017 ranks Kenya at position 145 out of 176 countries in the world. The high rate of corruption in Kenya means that the so called democratic institutions in the country are neither effective nor efficient.

Rwanda, on the other hand, has managed to effectively deal with corruption even as President Kagame continues to be accused of being a “strongman”. The same report ranks Rwanda at position 50 out of 176 countries in the world and the 3rd least corrupt country in Africa. This is an indication that governance institutions in Rwanda are very effective.

When it comes to healthcare, Kenya is no match to Rwanda despite the former having a high number of medical practitioners, medical training institutions and medical facilities. Rwanda stands out in Africa having formulated and implemented the universal healthcare system. This system enables all the Rwandese citizens to access healthcare services.

The situation is different in Kenya with most Kenyans finding it difficult to access affordable and high quality healthcare services. The day that the country’s most corrupt yet highly paid politicians will seek for medical attention in public hospitals, is the moment when the healthcare system will no longer be broken.

Despite having a constitution that is considered as one of the best in the world with democratic institutions, Kenya is really struggling with the political inclusion and representation of women. In the 11th Parliament, women accounted for only 19.7% of the total number of MPs in the National Assembly and 26% in the Senate. Unfortunately, most of these women parliamentarians are nominated. In fact, the 11th Parliament failed to pass the Gender Bill yet this is an institution admired by many in Africa.

For Rwanda, women representation in Parliament is close to 60% which is the highest in the world. Indeed, the dictatorial regime seems to be performing extremely well in the inclusion of women in political representation.

Even on basics such as environmental cleanliness, Rwanda outsmarts Kenya. Compare the capital cities of the two countries, Kigali and Rwanda. Kigali is a very clean city in comparison to Nairobi which is full of filth left, right and centre. The county government of Nairobi has failed terribly on waste management. But also the residents of Nairobi lack the discipline and common sense of keeping the environment clean.

Kenya’s economy is more developed than that of Rwanda despite the latter registering high rates of economic growth in the last ten years. However, the level of inequality and economic destitution in Kenya is high. Political and economic institutions have failed to address the country’s economic disparities.

President Paul Kagame, loathed and loved by many, has been successful in leading the country. Under his leadership, Rwanda has established effective institutions that are results-driven. Kenya is reeling from the confusion created by the constitution in terms of the governance institutions. These institutions have so far not been effective with the main problem being the poor quality of the country’s political leadership.

As Kagame is assured of winning another term in office, many still question his decision not to let go the presidency. But if majority of Rwandese have given him a go ahead, who are we to question and pester him? There are certainly various ways of attaining socio-economic progress and not necessarily the one dictated by Western governments and entities.

Deng Xiaoping, the man credited with spearheading China’s market reforms and economic resurgence, famously stated that “it doesn’t matter if a cat is black or white, so long as it catches mice”, indicating that economic growth and development can be achieved through various politico-economic systems. So, why don’t we appreciate that Kagame has invented a system that suits Rwanda?

The democratic Kenya faces a high stakes election that can either be won by the incumbent, Uhuru Kenyatta, or Raila Odinga. Kenya’s economic progress has been hampered by corruption with poor accountability of public financial resources. Kenya’s governance institutions are largely ineffective with incompetent individuals.

Rwanda’s authoritarian regime has effective institutions while Kenya’s democratic regime is struggling with institutional efficacy. As the two states head to the polls, the future of their citizens will highly depend on the outcome of the elections with regards to the organization of the governance institutions. For the two, it is a date with destiny.





Friday, 26 May 2017

Sonkorism versus Elitism Underpin the Capital’s Gubernatorial Race

Left to right Peter Kenneth, Mike Mbuvi and Evans Kidero.
Image: Courtesy
Touted to be one of the epic duels in the forthcoming general elections, Nairobi’s gubernatorial race presents an opportunity for key lessons to be learnt in view of the morals and perceptions of a society; the perceived ills, dissension and reality of the economy; and the cherished ideals, values and doctrines in a polity. The society, economy and polity in reference are basically a representation of Nairobi and extensively the Republic of Kenya.

The frontrunners in the capital’s gubernatorial race are the incumbent Dr. Evans Kidero and the current Senator Mike Mbuvi Sonko whose triumph will largely depend on the level of significance and sophistication that Peter Kenneth will bring into the race. Viewed from a superficial standpoint, Nairobi’s gubernatorial race appears to be a battle that will feature the Orange Democratic Movement (ODM) party and the Jubilee Party. With pristine insight, however, the gubernatorial race in Nairobi County is a duel that centres on the failed promises of the political elite as well as the elite individuals and the hope that the populist mantra of political leadership gives to the majority of the electorate and/or citizens.

Dr. Evans Kidero, Peter Kenneth and Miguna Miguna are quintessentially members of the elite and hence their policies and even ideologies tend to largely subscribe to the ideals and the values of elitism. Mike Sonko, the flamboyant Senator who had embraced the ruffian brand of politics until his recent nomination as Jubilee Party’s gubernatorial candidate, is a master of the populist politics and his values and ideals perfectly resonate with the thoughts and wishes of the common folk and more specifically the average Nairobian.

The elitist gubernatorial candidates have often-times chided Senator Sonko as a political leader who is incapable of steering the affairs of Nairobi County particularly in the management of the economy a notion that is widely shared among Nairobi’s elites who most of the times are out of touch with the reality. The Senator as usual continues to fire back at the so-called learned political class terming it a bunch of PhD holders who have failed to turn-around the fortunes of the capital’s residents. This jibe by the Senator of course demeans the value of academia and extensively the values of intellectualism but I have to admit that it is the bitter truth and the harsh reality.

Criticism directed to the Senator’s populist politics and the activities of the Sonko Rescue Team appear to be more than correct from an outsider’s perspective. The outsider’s standpoint in this case represents the thoughts of the elites who as I noted earlier on tend to fashion formality which has made them to be out of touch with the reality. The activities and operations of the Sonko Rescue Team can be classified as a “collection of informal policies in action" which in fact forms a basis for further research on the viability, validity and vibrancy of such kind of policies within Kenya’s economy and polity.

An insider’s perspective that is shared among the average Nairobians reveals that indeed the Sonko Rescue Team has been beneficial and one needs to take a walk to the informal and low-income settlements or get to hear from the common folk in order to come to terms with the reality. I cannot dispute the fact that the Senator has also used this opportunity to gain political currency but the factual information on the ground and the fallacious imaginations fabricated by majority of the elite are clearly distinct as day and night.

The Sonko Rescue Team is an outcome of a failed and flawed policy implementation process especially by the county government of Nairobi. If the economic heaven that Nairobians were promised by the incumbent was to happen, then I strongly believe that the Sonko Rescue Team would have been emasculated and perhaps casted to the oblivion. It is therefore the failure by the current government of Nairobi County to honor the social contract it signed with the Nairobians 4 years ago that has made the Sonko Rescue Team to be a vibrant outfit and hence presenting the Team Sonko as a juggernaut in the capital’s gubernatorial race.

Senator Mike Sonko has positioned himself as the voice of the voiceless and an advocate of the ordinary Nairobian. This is the cohort of the capital’s electorate that turns out in large numbers to vote and it is Nairobi’s populace that literally runs the city’s informal economy. The informal economy is larger than the formal economy in Nairobi and Kenya as a whole. A larger informal economy and a smaller formal economy is one of the distinctive features of a dual economy. Nairobi region contributes more than 60% of Kenya’s total Gross Domestic Product (GDP) and these estimates are majorly from the recorded formal economic activities. The informal economy creates approximately 85% of the total employment opportunities generated by the Kenyan economy of which Nairobi is largely responsible for.

The consideration and inclusion of the informal economy activities implies that indeed Nairobi contributes more than 75% of the total income generated in Kenya through formal and informal means. In short, it is the Senator who comes across as having a “realistic” plan for the Nairobians who eke out their living in the informal economy. The elitist political club of his opponents in the gubernatorial race cuts an image of an enemy of the informal economy with their economic ideologies and aspirations largely coming out as illusions of grandeur.

Party affiliation and tribal arithmetic are key factors that will determine the outcome of who will win Nairobi’s gubernatorial race but my bet is on Sonko to carry the day due to the failure of the political leadership of the incumbent. Nairobi is a cosmopolitan region and just like last time when the majority decided that Dr. Kidero was best suited to be the Governor than the battle-hardened Ferdinand Waititu, this time round the metrics will be based on the mega promises of the elite and the aspirations of the Sonkorism school of thought.

And by the way, some elites hold the opinion that the Senator’s lackluster performance in the Senate in terms of intellectually contributing to debates and drafting bills dwarf his ambition to be the next Governor of Nairobi County. But the reality is how many voters think of the debates and bills fronted by their representatives in Parliament when voting? Or rather, how many voters religiously follow the Parliamentary proceedings so as to know how intelligent their representatives are? In fact, majority of Nairobians voted for Mike Sonko as the Senator in the last general elections without considering how well or poor he was going to contribute to the Senate proceedings. The triumph of Sonko in the gubernatorial race will be an epochal moment and perhaps it’s time to taste new waters. The ultimate decision rests with the voters.

Tuesday, 16 May 2017

Of the Wagging Tail & Kenya’s Food Politics


Maize flour on the shelves of a supermarket.
Photo: Courtesy
For the common folk and the underclass of Kenya’s populace, their lives have literally been thrown into chaos following the on-going increase in prices of some of the commodities that are largely consumed by the households. The continuous rise in the prices of such commodities is said to be as a result of a number of factors depending on which side of the political divide you associate with and how knowledgeable you are as far as understanding the Kenyan economy is concerned.

Of course most of the supporters of the current regime and the not-so-insightful individuals relate the price increases to the perceived ‘natural’ forces of demand and supply backing up their arguments with explanations of how the market is adjusting itself naturally to the prevailing economic conditions. On the other hand, the associates of the other side of the political divide and a good number of Kenyans hold the view that perhaps the upward spiral of prices is the outcome of the activities propelled by the robber barons and a systemic failure of the current administration to fulfill its promise of lowering the cost of living for the majority of the Kenyans.

As to whether both political camps are correct or not, is for you to figure out as each is in the business of justifying its rhetoric with ‘facts’ with the end being to gain political mileage. The political class is part of the economic chaos and this will be evident later on in this article. With economic insight, it cannot be disputed whatsoever that the forces of demand and supply are responsible for the current increase in prices of some of the basic commodities. The crux of the matter, however, is the exact nature of these perceived forces of demand and supply in view of the continuous rise in the prices of commodities. Are the forces truly natural as posited by one school of thought as highlighted in the previous paragraph? Or are the forces largely artificial?

With the acknowledgement that depressed rainfall levels in 2016 led to a significant decline in the total yield of maize, sugarcane, rice and wheat, economic wisdom dictates and extensively reveals that the current situation is largely a creation of the proprietors and rent-seekers of the underworld economy. These are the robber barons and the cartels that are alive in the country. In the world, the activities and operations of any society, polity or economy are under the control of the cartels and the interest groups irrespective of whether an entity cherishes and embraces the ideals of capitalism, the values of socialism or a hodge-podge of the two systems.

In his book, Naked Economics, Charles Wheelan an economist and public policy analyst likens the operations of the cartels and interest groups in an economy to the tail wagging the dog. Yes, the tail wagging the dog and not the dog wagging the tail. This illustrates just how powerful the cartels are and such is the case in Kenya. The presence and vibrancy of the cartels in the economy is a strong indication of market failure which calls for government intervention in the economy especially in the production and distribution of the basic commodities including food.

A holistic look at the Kenyan price conundrum leaves a lot to be desired in the general management of the economy and most importantly the implementation of the relevant and existing economic and/or agricultural policies. Reflecting on the maize and sugar “shortage” in the country, a number of fundamental questions and concerns need to be posed and raised at the same time: how effectively and efficiently are the existing agricultural policies being implemented? Is it possible that the political leadership in Kenya tends to ignore the advice given by government agencies as part of the mitigation measures? How efficient is the absorption of funds set aside for the food security programmes and projects? In what way do the cartels outsmart the political leadership? Or is the political leadership in Kenya a conduit for the cartels?

The ship with the maize imported from S.Africa.
Photo: Courtesy
At the inception of the Jubilee administration in March 2013, promises were firmly made on how Kenya would be the foremost food secure country not just in the Eastern African region but the entire continent of Africa. It was at the backdrop of these promises that the idea of irrigating one million acres of arable land was mooted and conceptualized with the outcome being the Galana-Kulalu Food Security Project. Over Kshs.10 billion have been allocated to this project over the last four years but the trickle-down effect is yet to be witnessed by majority of the Kenyans. From my perspective, the below par performance of the Galana-Kulalu Food Security Project is majorly due to two main factors: there is a high possibility that the feasibility studies conducted to ascertain the viability of the Galana-Kulalu project were poorly done at the expense of gaining political capital; secondly, the funds allocated each financial year towards the financing of the project are poorly absorbed due to financial bureaucracy and corruption.

Kenya prides herself in being the most advanced economy in the Eastern Africa region but in a country where affordability of the basic commodities is a preserve of the haves illustrates just how cards are being shuffled under the table. Maize is Kenya’s staple food and any right-thinking citizen would expect that the political leadership would rise to the occasion to cushion the average Kenyan against any shortage that might be experienced. Towards the end of 2016, the National Drought Management Authority (NDMA) issued early warnings on the La Nina effects responsible for the depressed rainfall experienced in most parts of the country. The Executive and Parliament responded by stating that the necessary measures have been put in place to ensure that there is a constant supply of maize. This is hence a situation that the political leadership was well aware of not now but last year.

It is from such information from the NDMA and other agencies that the cartels began positioning themselves strategically; they hatched schemes to create an artificial shortage of maize. In fact, having known that last year’s total production of maize fell in the country from 43 million bags to around 37 million bags, the cartels were smiling all the way as opportunities to import maize were in the offing. It should be noted that Kenya has over the years been importing maize and maize flour from countries such as Uganda, Tanzania and even at one time from Malawi. Acknowledging the principle and concept of comparative advantage in trade between nations, it is comical for a country like Kenya that has a high agricultural potential to be importing a food crop like maize.

Fast forward, the ‘shortage’ of maize apparently forced the government to import maize and this came after the tax exemptions on maize and wheat imports as per the Budget Policy Statement presented by the Cabinet Secretary of The National Treasury in the National Assembly in March this year. Conflicting reports have been issued by some of the senior government officials on just who is importing the maize and the point of origin of the imported maize. Initially, reports issued by the government stated that maize was to be imported from Mexico with the importing entity solely being the government. Later on, it emerged that the maize was to be imported from South Africa by three private companies. Conflicting information and communication is a strong indicator that perhaps things are not adding up and it is from such that you can be able to detect the machinations of the cartels. As a matter of fact, the consignment of maize that has just been imported was apparently ordered late last year by the importing firms.

Packaged sugar on sale at a supermarket.
Photo: Courtsey
Turning to sugar, savage politics and economics shaped by the cartels continue to haunt this industry. At the moment, a 2 kg packet of sugar retails at approximately Kshs.400. Still there are some people who believe that the natural forces of demand and supply are fully responsible for the current shortage! The discipline of Economics, however, gives leverage to individuals to present different arguments and belong to different schools of thought hence the commonality of the phrase “on the other hand…” In August 2015, there was a heated debate around the country following the deal signed between the current administration and the Ugandan government to import sugar from Uganda. Kenya’s demand for sugar exceeds the local supply and this necessitates the importation of sugar but the supply deficit has never been chronic.  How then is it possible that most of the sugar companies excluding Butali Sugar Mills and West Kenya have been closed for regular maintenance? If so, then what informs such action that is devoid of any form or kind of strategic thinking? Let’s forget about the regular maintenance stuff because it has been happening year in year out. This is the strong hand of the cartels busy at controlling the economy.

The poor performance of the sugar-milling factories seems to be more of a political issue than an economic issue. The sugar industry has been politicized resulting in vague resuscitation programmes such as the common bail-outs from the national government. The sugar industry is under the manacles of the cartels and the latter strongly dictate which sugar-milling company is to be bailed out or not.

Fundamentally, the current economic chaos that is yet to morph into an economic crisis is as a result of an inconsistent political leadership. A consistent political leadership, both at the National Assembly and the Executive, would ensure that the formulated agricultural/economic policies such as the Agricultural Sector Development Strategy and Vision 2030 are implemented as expected and would also viciously fight the cartels. Political leaders and other experts should not be talking about seeking for long-term solutions because there are existing economic blueprints whose implementation is erratic and inconsistent. The cartels in the Kenyan economy fashion the vicious circle of poverty and are sworn enemies of the ideal virtuous circle of prosperity. The tail (cartels) has successfully wagged the dog (Kenya).

This article was first published on blog.savicltd.co.ke





Tuesday, 25 April 2017

Party Nominations Are a Reflection of Kenya’s Political Culture


Police officers providing security during a party nomination exercise in Mombasa.
Courtesy: Daily Nation
The electioneering period in Kenya is usually an interesting and eventful moment but how interesting it is solely remains to be a function of either one’s apolitical nature or level of political consciousness. Bearing the apolitical attitude is a dangerous precedence and a risky affair that not only undermines our Republic’s Constitution, in view of the responsibilities accorded to the citizens, but also jeopardizes the institutionalization of a moral and visionary political leadership for our state.

That a moderate and high level of political consciousness will translate to the establishment of a better political leadership is a fact and not a reverie basing on the political trajectories adopted by the polities that are perceived as democratic around the world. The electorate should exercise political consciousness at all times and not at certain times as it is the case for Kenya. This noble consciousness needs to take root right from the operations/activities of the political parties and should not just be exercised at the national political level.

Fast forward, the last few days have been crucial for the political parties with respect to the nomination exercise. As anticipated, the process has been characterized with incidences of violence, logistical challenges and other electoral malpractices such as rigging. The occurrence of the aforementioned activities is a pointer that there still exists an institutional as well as organizational weakness in view of the structural mapping of political parties in Kenya. One may argue out that a number of political parties have conducted their nominations in a peaceful manner but such a postulation is ignorant of the reality that defines and describes Kenya’s political architecture. What then is this reality?

To begin with, parties that manage to conduct their nominations without any cases of rigging, logistical challenges or chaos are not largely popular. Case in point, the nominations of the Orange Democratic Movement and the Jubilee Party of Kenya. It follows then that parties which conduct the primaries seamlessly are political outfits that are popular just within some political circles with their overarching feature being a narrow political base however significant this may turn out to be.

The party nominations present lessons and insight on the underlying fundamentals that guide and govern the politics practiced in the Republic of Kenya. It is therefore a perfect illustration of the “part” representing the “whole.” The political craziness and madness that grips the parties is a further representation of the values that are embraced by the political leadership of this state. The genesis of these shenanigans that are now becoming a permanent feature for the parties is the form and way in which these political parties are formed and how they operate. In one of the articles that I penned last year, I clearly argued on the ideological deficiency syndrome that affects political parties in the Kenyan polity.

Head of Jubilee Party Secretariat, Raphael Tuju, at a press conference.
Image: Courtesy
Political parties in Kenya are established based on the interests of personalities and not on the supreme agenda of the citizens. As a consequence, we have parties that only serve as special purpose vehicles and can be folded up at any point in time which proves to be a critical juncture. From the outset, therefore, it can be noticed that the mode of formation of the parties is one of the intrinsic weaknesses. Since political parties are centred on personalities, it implies that their operations are funded by individuals who are close associates of the parties’ bigwigs. In addition, this also means that the parties’ rank and file comprises of the people who have good “connections” with the parties high and mighty irrespective of how irredeemably incompetent they may be.

Rigging of the party nominations and other stage-managed antics and activities occur because most of the Governors and other incumbent politicians are some of the main financiers of the political parties. How then do you expect an individual who has been largely financing the party to “lose” the nominations? Logically, in the Kenyan political context it cannot work. The delays in the starting of the voting exercise in the party primaries and other logistical challenges that have been reported are some of the antics that have been stage-managed by the political parties to create apathy among the voters so that the preferred candidates carry the day. Even the parties’ high and mighty are well aware of this scheme.

Consequences & the Future
Chaotic and shambolic party primaries informed the decision by some of the aspirants to decamp to the political parties which are perceived as safe bets while a significant number of those who seemed to be confident of their parties but were rigged out have opted to contest as independent candidates in the forthcoming general elections.

ODM Elections Board chairperson Judith Pareno and commissioner Ismael Aden.
Courtesy: The Star
Going into the future, there will be a paradigm shift and change of Kenya’s political architecture based on two factors. Firstly, if parties are not going to conduct their nominations in a manner that is organized then we should expect that the number of independent candidates in the subsequent elections will increase. In fact, even in this year’s general elections, the number of independent candidates is going to be higher when compared to the 2013 general election. I therefore presuppose that at least there will be one candidate or so elected as a Governor with a good number elected as Members of Parliament and the County Assemblies.

Secondly, there will be an increase in the formation of new parties with their party leaders being mostly the Governors. The subsequent elections will witness an increased number of the small but strategic parties led by a number of Governors. This scenario will be more evident if the major political parties do not embrace sobriety with regard to the conduction of the nominations. The 2017 general election will present an opportunity for these small but strategic parties to have their candidates elected in all the political positions except the presidency.

Political Party Reformations
Despite the fact that the Kenyan polity is a fledgling multi-party democracy, there is need to ensure that reforms are carried out to inject some significant degree of proper organization and sobriety within the structures of the political parties. The reforms should effectively address and cover the following issues:
  • Amending the Political Parties Act to ensure that parties within the Republic of Kenya are citizen-based and not centred around personalities. 
  • Recruiting competent and qualified staff at the secretariats of the respective political parties.
  •  Instituting capacity building and development programmes for the officials who conduct the party primaries. This should be done on a continuous basis and not just three days or one week before the nominations as it is currently carried out.
  • Ensuring that parties have updated databases of their party members so that only the bonafide members participate in the nominations.


The political parties ought to adopt the institutional model of running their activities and not the current dispensation which fashions a lot of mediocrity because it is primarily based on a short-term agenda. The institutional model focuses on the long-term by helping to nurture competent political leaders and in shaping the policy debate of the country’s path to economic development as well as structural transformation. Strong and mature political parties beget a vibrant and mature democracy.

Monday, 3 April 2017

A Review of the 2017/18 Budget Policy Statement


The Budget Policy Statement, otherwise commonly referred to as the government budget, is a policy edifice that reveals how the government plans to raise revenue and how it intends to spend the revenue that it anticipates to collect. On Thursday March 30th this year, the Cabinet Secretary in charge of The National Treasury Henry Rotich presented in the National Assembly the fifth budgetary estimates under the Jubilee administration. The trend set by the current administration, a liking for highly ambitious budgets, again took centre stage when Mr. Rotich presented the 2017/2018 Budget Policy Statement (BPS). Since the inception of the Jubilee administration the highly ambitious budgets that have been drafted by The National Treasury with instructions from the Executive have led to a steady increase in the level and/or amount of the total public debt.

A budget being a supreme policy tool is at the same time a political tool; the policy-making process is not insulated from the political forces and the political process. This is primarily based on the simple logic that the President would always want to oversee the allocation of funds that would facilitate the implementation of the development projects especially those that were part of the campaign pledges. 2017 being a year that the Kenyan polity is expected to have general elections, the budget as obviously expected outlined the agenda of the current administration ostensibly to have an edge as far as the re-election of President Uhuru Kenyatta is concerned.

CS Rotich with Budget Appropriations Committee chair Mutava Musyimi (Left) and CS Devolution Mwangi Kiunjuri (Right) before presenting the budget.
Image: Courtesy
Termed as a pro-Wanjiku budget by those who politically orient towards the Jubilee administration and pronounced as a populist policy/development agenda by the members of the opposite side of the political divide, it is vitally important to stick to the available facts and at the same time avoid fictitious information. The 2017/18 budget amounts to Kshs.2.643 trillion which represents the largest budget ever in Kenya’s history. Out of the Kshs.2.6 trillion that the government is planning to spend it can only manage to finance this expenditure by Kshs.1.549 trillion which is the total amount of revenue that is expected to be raised by the Kenya Revenue Authority in the next financial year. However, the total amount of revenue that is inclusive of the Appropriations-In-Aid (AIA) or grants is expected to be Kshs.1.704 trillion.

With expenditure expected to amount to Kshs.2.6 trillion and the total revenue at Kshs.1.7 trillion, this creates a budgetary deficit of Kshs.880.4 billion. It is important to note that CS Rotich was very economical on the total amount of expenditure and net lending for the next fiscal year, 2017/2018. According to the budget statement that he presented in the National Assembly, the total expenditure and net lending for 2017/18 is Kshs.2.287 trillion with a fiscal deficit of Kshs.524.6 billion. There is something that the CS never wanted to reveal to the Kenyans who are seriously concerned about the state of affairs in this Republic. The purported deficit of Kshs.524.6 billion was arrived at after leaving out the exact expenditure of the county governments. With the inclusion of the expenditure by the county governments the fiscal deficit amounts to Kshs.880.4 billion.

The Overarching Positives
There are a number of positive policy proposals that stand out from the 2017/2018 Budget Policy Statement (BPS) from a macroeconomic standpoint. The manufacturing sector is a crucial sector in terms of accelerating the economic growth and structural transformation of an economy. Over the years, a number of policy proposals in view of the sector have always been drafted so as to inject a high degree of vibrancy into the sector. Earlier on, such policies fronted for the establishment of the Export Processing Zones (EPZs) and currently, the establishment of the Special Economic Zones (SEZs) in Lamu, Mombasa and Kisumu.

Provision of incentives such as exemption from Value Added Tax (VAT), periodical reduction in the corporate tax rates, quality infrastructure and one stop shops for licenses as outlined in the Budget Policy Statement (BPS) will pave way for the establishment of the SEZs. For instance, the CS National Treasury made the following proposals to create an enabling environment with respect to the SEZs:
  • ·   Amendment of the Income Tax Act to exempt the dividends paid to non-residents by the firms located in the SEZs.
  • ·         A reduction of 15% to 5% of the withholding tax on interest payable to non-residents by the SEZ-located firms.
  • ·   Allow SEZ firms to deduct 100% of the investment cost of building and machinery.
  • ·    Exempt goods imported by SEZ firms from export duty and exemption of imported goods from Import Declaration Fees by the same firms.

Furthermore, the current administration seems to be focused on positioning Kenya as a vehicle assembling hub in the region as evidenced in the Budget Policy Statement (BPS). The CS made a proposal to amend the Income Tax Act so as to reduce the corporate tax for new vehicle assemblers from 30% to 15% in the first five years of their establishment. In addition, the proclamation by the CS on the completion of the Comprehensive Automotive Industry Development Policy and the Automotive Industry Development Plan will be key in promoting the growth of the vehicle assembly industry.

Food security has been and is still a big challenge for the country because of the prevailing inconsistencies in the implementation of the existing food security policies. To promote agricultural production, the irrigation projects have been allocated a total of Kshs.6.3 billion while the fertilizer subsidization programme has been allocated Kshs.4.1 billion.

The 2017/18 BPS presented a win for a significant number of the low income earners. This is in view of the expansion of the tax band by 10% and increase of the tax relief by 10% implying that a significant number of the low income earners will be exempted from paying income tax. As a result, the lowest taxable income has been raised from Kshs.11, 135 to Kshs.13, 486 per month. In addition to these tax exemptions and reliefs, the next financial year will also see the low income earners continue enjoying tax exemption on bonuses, overtime allowance and retirement benefits that were effected in the on-going fiscal year. Holding other factors constant, this will increase the level of disposable income for the low income earners though it comes out as a policy meant to gain political mileage as these earners form the largest proportion of the voters who turn out to vote.

CS Rotich presenting the Budget Policy Statement in the National Assembly.
Image: Courtesy
Amid the hue and cry of the majority of Kenyans on the rising cost of maize flour and other food stuff, The National Treasury CS scrapped off the input tax charged on maize and wheat flour by zero-rating the two commodities. This implies that the prices of maize and wheat flour need to decrease significantly. The maize that will be imported in the next four months will be exempted from import duty which in effect implies that common end products from maize and wheat flour need to be relatively cheaper. The CS put on notice the county governments which have perfected the act of double taxation. This has created a hostile business environment.

The continued investment in infrastructure is vitally important in enhancing the productive capacity of the country’s economy. In the 2017/18 BPS, Kshs.134.9 billion has been set aside for roads, Kshs.75.6 billion for the development of the Standard Gauge Railway, Kshs.10 billion for the LAPSSET project, Kshs.2.6 billion for the expansion of airports and Kshs.16.4 billion for expansion of the energy projects.

Macroeconomic & Fiscal Concerns
There are sensitive issues which are supposed to be looked at objectively as far as the BPS is concerned. The first issue is the accumulating level of the total public debt which, according to the latest statistics by The National Treasury, stands at Kshs.3.827 trillion. Whether using the fiscal deficit of Kshs.880.4 billion or Kshs.524 billion, the level of public debt is set to hit the Kshs.4 trillion mark at the end of the first quarter of the 2017/18 financial year. Despite constant reassurances that the public debt level is sustainable, the situation will sooner or later run out of control if the level of borrowing is not checked.

The capping of the interest rates has no doubt resulted in relatively lower levels of credit advanced to the private sector especially the small and medium-sized enterprises (SMEs). The CS informed Kenyans as he tabled the BPS that the government in conjunction with the Kenya Bankers Association will commission a study to ascertain the impact of the interest law caps. To me, that would be a waste of time as the effects have already been felt. It will be economically prudent to do away with the caps on the interest rates if at all employment opportunities are to be created by the SMEs. As long as the interest cap is in place, the banks will comfortably lend money to the government at the expense of the private sector, more specifically the SMEs.

Another key concern is the rate and level of absorption of the budgeted finances. Research statistics indicate that only 60% of the finances set aside for development purposes are absorbed. The rest is either returned to The National Treasury at the end of the fiscal year or misappropriated/embezzled. Compound this with the fact that close to one-third of the national budget (expenditure) is never accounted for. This calls for the need to exercise financial prudence by the government institutions. In addition, the Office of the Auditor General must be guaranteed of its institutional independence in order to fast track the auditing of the accounts of the national government offices.

The public wage bill issue will still be fundamental in the 2017/18 fiscal year. If only 2% of the country’s population composed of public servants is paid 50% of the total revenue then it implies that out of the Kshs.1.5 trillion expected to be raised by KRA around Kshs.750 billion will go towards the payment of salaries and allowances. As a consequence, this has necessitated the freezing of employment apart from the security personnel, health workers, teachers and a number of technical staff as outlined in the BPS. The policy recommendations of the Salaries and Remuneration Commission (SRC) ought to be implemented to the latter but I am pessimistic because political expediency may override this matter of national importance.

The Bottom Line
At the end of the day, the implementation of the policy proposals highlighted in the 2017/18 BPS will truly determine if indeed the government is committed to creating jobs and delivering a better life for all Kenyans as per the thematic outline of the BPS presented by CS Rotich. This is especially the case with the food security measures and the proposals to establish a vibrant manufacturing sector in the country. The common denominator therein lies on the level of political will that will be exercised by the Executive and Parliament.

This article was first published on blog.savicltd.co.ke.




Thursday, 16 March 2017

State of the Economy: Discontent, Progress & the Road Ahead


President Uhuru Kenyatta delivering the State of the Nation address.
Courtesy: The Star
Following the State of the Nation address by President Uhuru Kenyatta, various remarks have been made on just how well or how bad the economy is performing. Of course, the interpretation of the aforementioned statement is directly dependent on which side of the political spectrum your conscience gravitates towards. A dose of sycophancy is therefore the absolute denominator of such fundamentalism but a sober, pristine and objective review of the state of economic affairs is vitally important.

With acknowledgement that Kenya is making progress on the economic front, much more needs to be done for an inclusive economic trajectory to be established. The economy is growing, isn’t it? The answer highly depends on whichever metrics and school of thought one subscribes to as far as ascertaining economic progress is concerned.

In 2016, Kenya’s economy is believed to have grown by 5.9%, an impressive growth considering the growth rates registered by the Sub-Saharan Africa (SSA) sub-continent and the world in general. The average GDP growth rate for SSA was 1.4% and for the entire world was approximately 3%. GDP remains an important macroeconomic indicator but it’s a flawed calibration of ascertaining economic progress. One way through which politicians and majority of journalists as well as a significant number of other pseudo-economists propagate confusion is by attempting to depict economic growth as structural transformation (economic development).

Fast forward, the tax man has done quite well with respect to the recorded increases in tax collection from Kshs.847 billion in 2013 to Kshs.1.2 trillion at the end of 2016 just as the president noted. The crux of the matter, however, is on the expenditure side with ostensibly 50% of the revenue collected going towards the payment of salaries and allowances for the 700,000 plus public officers. Statistical data compiled by The National Treasury indicate that in 2016, Kshs.627 billion was exclusively spent on salaries and wages. The public wage bill is approximately 10% of the economy’s GDP which is way above the global best practice of 7%.

A raft of policy measures were proposed by President Kenyatta to bring down the public wage bill as per the recommendations of the toothless and sort of ineffective Salaries and Remuneration Commission (SRC). The most notable among the proposals is the institutionalization of the pay cuts for the occupants of the political offices. There is no doubt that Kenya’s Members of Parliament smile the loudest at the banks compared to the other nations of the world. The happy-go-lucky Members of the County Assemblies also earn relatively high amounts of salaries. But just how feasible is this proposal to effect the reductions in the salaries and wages? Can we also put on the table other effective ways of dealing with this Kenyan economic monster in the name of the public wage bill?

Good economics is bad politics and bad economics is good politics and so how will the next administration deal with the voracious members of the august house to slash their salaries and allowances? With hindsight, the plausibility of implementing the salary cuts after the forthcoming general elections remains a Herculean task. In 2013 the Executive attempted to implement the proposals by the SRC focusing on cutting the salaries/allowances of the MPs and came up with new remuneration structures. This move was quickly thwarted due to political expediency. The number of representatives both at the national and county levels should be reduced and so is the number of workers employed by both levels of government. However, this is an issue that will be politicized bearing in mind the doctrine of political arithmetic.

Unemployment remains a thorn in the flesh for the current administration. In the State of the Nation address, the president highlighted that 2.3 million jobs have been created since the inception of the Jubilee administration. From the available statistical data by the Kenya National Bureau of Statistics (KNBS), this is in fact very true but the devil therein lies in the details, especially in the hidden information; there is need to assess the total number of jobs created in the formal sector and the informal sector. Facts indicate that for the last three years, around 20% of the total number of jobs created within the Kenyan economy was in the formal sector implying that the informal sector has been creating a larger proportion of the employment opportunities.

President Uhuru being received by MPs before the SOTN address.
Courtesy: Business Daily
A significant number of Kenyans feel that the president should also have addressed the retrenchment and lay-offs by various firms in the country. He simply couldn’t; it is politics you know! I hold the view that politics overtakes this crucial national issue of lay-offs. Most of the people do not endeavor to focus on the microeconomic aspects especially the business strategies for the affected firms and incidence and impact of technology which is a pronounced factor in engendering creative destruction. This is not in any way to suggest that perhaps the macroeconomic environment is not responsible but methinks the labour redundancy in the affected firms has been majorly occasioned by the microeconomic factors.

Official statistics by The National Treasury indicate that the national debt currently stands at Kshs.3.5 trillion which is approximately 51% of the country’s Kshs.6.9 trillion GDP (2016 estimates). There is a lot of uneasiness that perhaps the debt level is spiraling upwards at a very fast pace. There are two things to note with respect to this issue. First, borrowing is very crucial for any economy only if the money borrowed is chiefly used to finance key projects that generate more output in the future. Secondly, excessive borrowing is dangerous for the economy especially if a huge chunk of the national debt is in foreign currency. What exactly is the Kenyan debt situation?

If the last three years are to be considered, there is little doubt that borrowing is going to reduce. Reflect on the just-to-be read 2017/2018 Budget Policy Statement which as per now is pegged at Kshs.2.6 trillion. The relatively huge budgetary deficit will certainly demand for an increase in borrowing domestically and externally. Locally, banks will always be ready to lend to the government and in view of the misinformed capping of the interest rates we should expect the banks to lend more finances to the government than the private sector. Excessive borrowing, if not checked, will result in the crowding out of the private sector. The president’s reassurance that the country is not at risk of defaulting its loans because of the budgetary provisions to service the debts offers a glimmer of hope but we must be wary of the “whats” and “ifs” of the external debt. What if the economy of China (our largest creditor) or of the sovereign bond (read Eurobond) creditors experiences a recession or financial crisis? What if the government is unable to repay the debts? This is an economic discussion for another day. The borrowed funds have extensively been invested in the construction of the Standard Gauge Railway (SGR), roads, expansion of the Port of Mombasa, among other infrastructural projects.

The capping of the interest rates has outrightly backfired and the president acknowledged that the usury laws have slowed down the credit advanced to the SMEs and other high risk borrowers. I have always been consistent in castigating the regulation of the interest rates which appears to have been a matter of gaining political mileage. This is a perfect illustration on just how good politics is bad economics. The proponent of the Banking Amendment Act (2016) seems to have been acting on behalf of some interest groups (read cartels) who may have intended to run a very huge credit black market or who have the largest market share in the microfinance industry. This is a perfect example of the tail wagging the dog, as clearly put by Charles Wheelan, a move which ultimately dents the economy. Equity Bank, a bank which lends to most of the low-end borrowers, has already made losses. The good news, however, is that the president gave an indication of reviewing the laws on capping the interest rates. But did he not envisage the legislation as a perverse incentive? It’s good politics and bad economics after all.

The SGR passenger locomotives.
Courtesy: Standard Media
Key infrastructural projects in various sectors seem to be taking root thanks to economic diplomacy. The SGR is a key project whose input in the economy cannot be underestimated. While I am in agreement that the cost of the SGR was seriously inflated, I differ with most critics that it is destined to be a white elephant. The SGR is certainly not a brainchild of the Jubilee administration nor is it a flagship project of the same administration. This is one of the key infrastructural projects as outlined in Vision 2030 and the aspect of continuity of government is responsible for the implementation of such. The commissioning of the operations of the electric railway linking Ethiopia and Djibouti has elicited debate as to why Kenya opted for the SGR and not a modern railway line as per the global standards. It should be well-known that the EAC members formally agreed to construct SGRs in their respective countries. However, the Kenyan SGR can still be upgraded to an electric one at a cost of Kshs.40 billion.

Other notable benefits from the economic diplomacy that will go along in transforming the economy include the construction of the Kenya Advanced Institute of Technology at the Konza Techno City fully funded by the South Korean government. The German government is also developing new curricula for technical and vocational training institutes offering automotive engineering courses. Israel has also come in to facilitate agricultural expertise and technology. These are critical investments that will increase the capacity and sophistication of human capital that is a key driver of structural transformation. The manufacturing sector that is on a lull is a beneficiary of economic diplomacy with various plants set up and others being established. However, the government must also be committed in implementing the policy on setting up the Special Economic Zones (SEZs) to speed up investments in the manufacturing sector. India has also pledged to provide a market for some of the agricultural produce from Kenya.

This economic diplomacy also sets ground for more suspicion. It is of essence in economics that economic agents and units observe the doctrine of trade-offs. As much as these countries have pledged to invest in Kenya and Kenyans, what are they getting in return? My hunch is that they are after the oil and markets. In fact, for China, the oil is on their radar in addition to helping most of their unscrupulous businessmen to set up shop in the country. Economic crimes continue to drain the financial resources of the economy. We are told Kshs.3 billion has been recovered but we should have in mind that close to Kshs.500 billion of the budget is never accounted for. The Jubilee administration has not been impressive as far as the fight against corruption is concerned. More needs to be done.

We have to acknowledge the progress made but at the same time offer constructive criticism on the economic missteps. The economy is growing after all but developing at a slower pace that is generating frustrations and fueling discontent.

This article was first published on blog.savicltd.co.ke.









Thursday, 9 March 2017

The Disillusionment & Dissension of Globalization


Image: Courtesy
The global integration of the nations of the world on different paradigms and strands has largely been beneficial but at the same time, it has generated negatives on a wider scale. This is in no means to suppose or suggest that the global inter-linking of states and non-state actors is doomed to fail, but rather a wake-up call to the concerned entities (the multi-lateral institutions in particular) about the rising uncertainties and/or backlash against the doctrine of globalization.

There are two critical junctures in world history that apparently and ultimately led to the surge of globalization; the economic reconstruction of Europe after World War Two as directed by the Marshall Plan, formulated under the auspices of George Marshall, who served then as the Secretary of State for the United States of America. It was during this point in time that the Bretton Woods institutions namely the World Bank (International Bank for Reconstruction and Development, IBRD) and the International Monetary Fund (IMF) were established. The economic relations between Europe and the USA were furthered by these institutions and the mandate of the two was later expanded to reflect a global view.

The other critical juncture was the fall of the Berlin Wall and the fall of communism in Eastern Europe that culminated in the end of the Cold War. This was a milestone in view of globalization because it meant the opening up of the communist states and other aligned communist nations to the politico-economic activities of the rest of the world (Read the capitalistic world). It is important though to note that the surge in globalization was dampened by the global financial/economic crisis witnessed in 2008/09.

So, why the dissatisfaction and dissent against globalization? This has largely been occasioned by unfulfilled promises propagated by the pro-globalization individuals and institutions. As a matter of fact, globalization was initially touted as a mechanism that would effectively enhance the economic growth and development of the so called Third World countries. The notions that were initially harbored envisaged a fair global trade regime with minimal interference and interventionist policies by the advanced economies of the world. But the resentment against globalization can be clearly noticed even in the developed economies.

The Developed Economies Vantage Point
As noted, the negative effects of globalization are not confined to the developing economies and the newly industrializing economies as a significant number of the advanced economies are experiencing the backlash against this politico-economic phenomenon. The relocation of a good number of industries from the Western world to some of the Asian economies has resulted in labour redundancy with the industrial workers of the former being rendered jobless. Of course this relocation of industries is premised on the incentives at play and the aspect of economic geography. The Asian economies where these industries relocated were guaranteed access to relatively cheap labour plus other subsidies offered by the governments. This is a matter that a significant number of citizens in the Western economies view as a negative engendered by globalization.

World Bank headquarters.
Photo: Courtesy
It goes without doubt that the rise in populism and nationalism in some of the Western nations is perhaps a harsh reaction to globalization. The influx of immigrants has led to resentment with the right-wing ideologues taking it as part of their agenda to formulate policies and pieces of legislations that seek to check on the number of immigrants. There is a growing perception that the immigrants are competing directly for employment opportunities with the natives even for the low skilled jobs and this factor was partly responsible for Brexit and the triumph of President Donald Trump in the hotly contested and divisive US presidential election.

Of essence is the prevailing attitude that membership to economic blocs and/or economic unions has curtailed the power of the independent states to be able to negotiate for better trade deals with other countries. Despite a guaranteed access to a ready market, majority of the Britons so it fit to vote in favour of Brexit in pretext of the jeopardized sovereignty thanks to the policies and legislations of the European Union. Through the Executive Orders, President Trump nullified the membership of the USA to the North America Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP). The reason for this; industries/firms would shift to member countries where business costs are a bit lower.

An African Standpoint
Whether the African countries have benefited from globalization or not depends on which angle one views the matter from. The concept of globalization, from an African point of view, has not greatly benefited the African economies. Of course one of the factors that supports this statement is the aspect of global trade where African economies operate on the periphery and are well stuck at the bottom of the international trade. This has ostensibly been precipitated by the protectionist measures adopted by the developed economies and some of the newly industrializing economies.

The World Trade Organization (WTO) has never been committed to ensure that the principle of fairness is adhered to in global trade which has given room for the advanced economies to institute protectionist measures against some of the agricultural products/produce originating from Africa. But it is a matter of political expediency as the WTO is controlled by the world’s developed economies. Even the Africa Growth Opportunity Act (AGOA) was to help the African economies to access the American textile market but its efficiency as a policy instrument is highly questionable.

Map of Africa.
Image: Courtesy
Economic globalization has led to the incidence of capital flight and tax evasion from Africa through the multi-national corporations (MNCs). This is simply corruption at play and the bottom line is that most of the African governments collude with some of the MNCs to rob the African countries. When the so-called trade deals are signed between two countries (an African one and a foreign state) to develop infrastructure or exploit minerals, full disclosure of the trade agreements are never made to the public. This is the major reason why some of the MNCs take the lion’s share of the revenue from the natural resources and even engage in illicit economic activities.

Political globalization has always taken a backseat with economic globalization being prioritized and this has disadvantaged Africa. The non-commitment by the advanced economies to institutionalize reforms in the multi-lateral institutions is a pointer to the continuation of the dependency syndrome which has over the years been perfected by the world’s dominant economies. The World Bank must be reformed if the development assistance that it offers to African countries is to be beneficial. The International Monetary Fund should be reformed so that its policies are not in favour of the USA and other advanced economies as it is currently. Reforms are needed at the WTO to ensure that Africa, highly disadvantaged on the global trade scale, benefits the most from international trade. The United Nations must also be reformed and have an overarching role in view of the other multi-lateral institutions.

The Chinese Eye View
For a relatively long period of time, accusations have been labeled against the Chinese for being circumspect towards globalization. Should the Chinese really be blamed for this? The Chinese should not be blamed wholesomely for the (perceived) failures of globalization. China was very clear on its economic model and set out to actualize it through the implementation of feasible and viable economic policies that were suitable to the Chinese socio-economic and political conditions.

A man looks at the Pudong financial district of Shanghai in this November 20, 2013 file photo. REUTERS/Carlos Barria/Files
China outsmarted globalization at that point in time when the Western nations were busy propagating for the idea. It was through the economic wisdom of the Chinese that they instituted industrial protectionist policies to cushion the local industries and create more employment opportunities for the Chinese nationals. In fact, the industrial economies of scale created from the concentration of industries in regions/cities with very high populations (economic geography) led to the relocation of a significant number of industries from the Western economies to China. If China was to fully embrace globalization as it was being pushed to, then the economic growth and structural transformation witnessed in the country could not have taken place.

From a Chinese perspective, embracing globalization at the early stage of the economy’s reformation would have been economically suicidal as globalization is a jungle where the strongest (advanced economies) always take advantage of the weakest (economies that are playing catch-up).  At the moment, though, China’s economic progress significantly relies on globalization with the country making serious infrastructural investments in Africa, Europe, South America and largely trading with the USA (China is the largest trading partner of the US). There is a very high possibility that China could be the world’s major driver of globalization at this moment in time.

The Road Ahead
The world should concentrate its efforts in making political globalization to work by being committed to reforming the United Nations, the World Bank, the IMF, and the WTO among other multi-lateral institutions. Institutional reforms would imply that proxy wars are eradicated from the face of the globe and viable investments are made by these institutions. This is a potent way of reducing the number of immigrants into the advanced economies. Advanced economies allocate a lot of financial resources to fund the wars at the expense of investing in their respective economies.

Skepticism in the face of constructive globalization is inevitable because of the geopolitical interests at play. Africa, through the African Union must seize the moment and push for better deals at the global roundtable. The reformation of globalization will be beneficial to all the units though in varying degrees but at least guarantee the socio-economic transformation of developing economies ceteris paribus.

China’s continued structural transformation will play a very significant role in reshaping the globalization trajectory. This could work in favour of Africa or against Africa depending on the costs and benefits realized from the Chinese model of international relations.


This article was first published on blog.savicltd.co.ke.