Friday, 18 March 2016

Economic Take-off Abridged By Covetous Individuals

Most of my write-ups in this blog have largely focused on issues that deal with economic and political governance with respect to my beloved state of Kenya and my continent of Africa. It is not that I hate or in any way regret being born in this part of the world but I take it as a duty and a challenge to make Kenya and Africa better than I found them. On this note, therefore, I will neither tire nor relent in my efforts to see Kenya and Africa in general become better places as far as governance is concerned.

Fast-forward, Kenya is a country that has great potential to become an economic powerhouse in Africa and even in the world. This great potential can be realized through the socio-economic policy papers and the respective policy frameworks that have been formulated since the time we attained our independence up to the present moment.

In fact, at one time, Kenyans were considered as the best policy makers in the world. This accolade, however, is accompanied by the word but which has completely reversed if not negated the compliment so made by public policy analysts around the world. The but itself is that we are so poor when it comes to policy implementation. This is the harsh reality and the bitter truth.The poor policy implementation that has become the zeitgeist in the socio-economic policy realm can be traced to the unending if not spiraling rates of corruption that continue to bedevil the Republic of Kenya. 
Recently, a report released by the PwC ranked Kenya as the third most corrupt country in the world. To me this was not a shocker going by the recent slippery-slope dynamics with the revelations of incidences of rapaciousness that have rocked the Jubilee administration.

In addition, a few days ago, the chairperson of the Ethics and Anti-Corruption Commission (EACC) Philip Kinisu candidly revealed on how approximately Kshs.600 billion of the national budget is lost through corruption. Can you imagine what could be done with this amount of money?

Talk of infrastructural development in terms of construction and expansion of roads, construction of railway lines, modern airports, seaports among other social amenities that are key to necessitating an economic take-off. This is certainly the economic cost of corruption. 

Our country’s economic growth for the last three years has been an average of 5.5% with an economic growth rate of 5.6% in 2015, 5.3% in 2014 and 5.7% in 2013. To me, this is an average economic performance going by the potential that our economy harbors. If transparency and accountability could be strongly adhered to by the relevant authorities then achieving the magic 7% economic growth rate would not be difficult. 

In as much as our economy is prone to the exogenous shocks due to the inter-linking nature of the global economy, I am pretty sure we could be gearing towards the double-digit growth promised by the current regime if financial and budgetary prudence could be effected. But at the moment this remains a pipe-dream because of the stagnation in economic growth that is being seen.

I deeply understand that the Jubilee administration minions would like to chest-thump and shout at the top of their voices that the economy is doing well, may be well than Burundi, Somalia and the ilk, but the reality is that our economy is experiencing stagnation. Blame this largely on corruption.

It is also because of corruption that the Cabinet Secretary in charge of the National Treasury, Henry Rotich, recently decided to reduce the development expenditure by about Kshs.49.1 billion in the forthcoming Budget Policy Statement for the fiscal year 2016/2017. His explanation; the Kenya Revenue Authority failed to meet its revenue collection targets as at December 2015. 

The failure by the Kenya Revenue Authority to meet its revenue collection targets is largely due to corruption. I do not understand why this is the case considering that Kenya is among the few countries in the world where the rates of taxation are very high. Sometime late last year, the KRA staff was to be subjected to a radical lifestyle audit whose findings we are yet to hear. Or it was just another PR gimmick. Who knows?

This incongruity between the revenue collected and the revenue targets set is occasioned by plundering and this has continually led to relatively huge budgetary deficits whose result has been the limited financing of key infrastructural projects hence holding back Kenya’s would be rapid economic take-off. Or from another angle, why should we have huge budgets that we struggle to finance? I know that the Treasury honchos are sticking to the Keynesian principle of deficit financing and spending but they get it wrong because this only works well in case of an economic recession which we are not experiencing. Again, deficit financing cannot be applied in all economies because there is a lot of dynamism. These budgetary deficits may be the trigger factors for corrupt activities by the KRA.

A recent report by the World Bank revealed that Kenya’s level of unemployment is relatively high even outpacing her counterparts in this geographic region. The high level of unemployment is due to the economy’s inability to create more employment opportunities for the skilled individuals who are churned out in thousands each year by the training institutions.

Few days ago I came across some hearsay that 800,000 jobs were created by the economy last year in both the formal and informal sectors. This is just some wanton statistic propagated with the sole aim of gaining political mileage. The truth of the matter is that the level of unemployment is very high because the financial resources meant to stimulate job creation are squandered by some politically correct individuals.

For instance, have a thought on the National Youth Service, the Uwezo Fund or even the Standard Gauge Railway. Avowedly, these were projects meant to enhance economic growth with a view of creating employment opportunities. Billions of shillings were set aside to actualize them but we all heard cases of embezzlement tagged on each of the projects. 

The Jubilee administration should pull up its socks in terms of creating jobs for the youth. I clearly understand that many people relate the current unemployment crisis to the education system but what if the embezzled funds were diverted to institutions of higher learning purposefully for research activities and financing start-ups by brilliant college students? At the end of the day the bottom line still remains to be corruption.

Mid last year, the US President Barack Obama while in Kenya gave a public address in which he talked about corruption and lamented on how it is pulling back Kenya’s progress. He in fact stated that 250,000 jobs are lost annually due to corruption. Later on, Pope Francis paid a visit and he talked about the same issue. 

The steps taken by the current regime to expunge this vice are a bit superficial. Until a ‘big fish’ is sentenced with no privilege accorded behind bars is when the common folks will renew their sense of patriotism and optimism. Otherwise, for now, tackling graft is mere rhetoric despite it being a bread and cheese question. Economic take-off is being compromised by the cost of corruption.

Saturday, 5 March 2016

Which Politico-Economic Model Suits African States?

Any upright-thinking economist or public policy analyst and enthusiast knows and to the least understands that Economics as a discipline cannot solely be studied without paying attention to the political happenstances be it the past political events that are detailed in political history, the current political events or even the future political events that are bound to take place. Hence, applied and comparative economic analysis cannot be executed in isolation of the political activities and events. After all, the government, whether directly or indirectly, influences public policy in one way or another. 

On this particular note, the economic growth and development of a state is a function of the political nature of the polity itself, its political inclusivity and to a larger extent the political willingness of the political elite and leadership to initiate, catapult and sustain an economic trajectory that seeks to positively transform the lives of the citizenry.

Related to this is the subsequent and consequential politico-economic model that emerges or if in existence, that positively enhances economic growth and development. Precisely, this refers to the specific political ideology and/or the political philosophy that a given country or state adopts. This can either be democracy, dictatorship or an intermittency of the two. This intermittent form of political governance centres on the principles and practices of both the democratic form of governance and the dictatorial one.

Over the years, democracy has been viewed and touted as the absolute standard and benchmark for political governance because it promotes inclusivity. This inclusivity comes in the form of enhancing the institutions of private property which is diametric of the exclusivity that is propagated largely by the dictatorial regimes which create bastions of cronyism by the power elite.

In this Millennial period of time, referred to as Africa’s Moment in which it is expected that Africa is gonna experience renaissance, we have witnessed the emergence and re-emergence of democracies, dictatorships and authoritarian regimes. In the independence wave period of time, most of the states embraced democracy but sadly a large number failed to maintain it. What followed was an era that witnessed coups with the aftermath being the establishment of governments that were either run by the military juntas or authoritarian personalities. This was a period that was marked by economic stagnation due to embezzlement of resources occasioned by large doses of cronyism and the fear by foreign investors to establish their investments in most of these states.

Later on, with the intervention of the Bretton Woods institutions (The World Bank and the International Monetary Fund) to restore economic order and prosperity, these nations were required to establish democratic governments with independent institutions of governance. Some did but others did it as a formality out of the economic desperation that they encountered. 

But we have come to witness that some of the states, though not democratic, have lately experienced relatively high levels of economic growth rates of approximately between 7% and 10% which to me is remarkable growth that can quickly lead to economic development. This can be easily noticed in countries such as Rwanda and Ethiopia, dubbed as the African Lions, a misnomer for the countries experiencing high rates of economic growth in Africa. 

A common denominator among these two countries is that they are not open democracies. Instead, they are classified as competitive authoritarian regimes that allow elections to take place but the state machinery are highly used to check on the opposition figures and civil societies who are likely to strongly oppose the views and actions promoted by the incumbent(s). In Ethiopia, we have heard cases of journalists languishing behind bars especially during the era of the former Prime Minister the late Meles Zenawi. Similarly, in Rwanda, politicians who belong to the opposition side have been jailed and some even barred from contesting the presidential elections.

But the fascinating thing is that these two countries have had resounding periods of economic growth rates despite the authoritarian tendencies by the incumbents. Could it be that the incumbents view democracy as a hindrance to economic prosperity? May be yes going by the economic miracles witnessed among the Asian Tigers. In fact, Meles Zenawi in his monograph Dead Ends and New Beginnings strongly detests the ideological and philosophical dispensation of neo-liberalism which according to him is a major bottleneck towards the realization of the African Renaissance. 

For the late Zenawi and President Paul Kagame of Rwanda, they fashioned and fashion respectively the economic trajectories realized by the Asian Tigers comprising of Singapore, Malaysia, South Korea, Taiwan, Hong Kong and other Asian states such as Japan and China. These Asian states adopted the ‘development first democracy later’ mantra which led to remarkable economic growth and development.

One however may argue on why some countries despite having authoritarian regimes have completely failed to take-off economically, a relevant case being Zimbabwe and Burundi among many others. The answer can be traced to two significant factors one of them being the personality of the leader and secondly the strength of the anti-corruption institutions that are in place.

In terms of the personality, there are some leaders who have a strong will to see the lives of the people improve albeit having authoritarian tendencies. These are those who are not driven by the urge to siphon public resources otherwise known as cronyism. On the contrary, leaders in authoritarian regimes experiencing economic meltdown are known for their rapacious tendencies as far as usage of public resources is concerned. Robert Mugabe for instance recently spent $1 million for his birthday party celebrations when the masses are swimming in pools of poverty.

Secondly, authoritarian regimes that experience tangible rates of economic growth at least have strong institutions especially those that check on corruption. The Asian Tigers and the African Lions have been known to have relatively low levels of graft. The comparison states on the other hand, have no institutions responsible for fighting corruption and this is where the difference emanates from.

There are several democratic states which are experiencing relative rates of economic growth and development among them Botswana, Kenya, Nigeria, Ghana, South Africa et cetera. Out of these states, Botswana has performed impressively owing to the inclusivity of her governance institutions. A notable and significant observation is that authoritarian countries with efficient anti-graft policies are experiencing the highest levels of economic growth outpacing their counterparts whose governance is premised on democracy. This is food for thought as far as African Renaissance is concerned. So which politico-economic model should African states adopt to adapt to the shifts and changes in the global economic landscape? Think about this. Thank you for reading.