Kenya’s economy: Running out of puff?

Kenya’s economy: Running out of puff?

The economy, which was widely expected to accelerate following the general elections a year ago, has, in fact, shown a worrying stagnation over the past year. The country is also becoming increasingly unsafe. What is going wrong? Wanjohi Kabukuru provides some answers.

The recently released Kenya 2014 Economic Survey indicates that in 2013, the economy grew by only 4.7%, falling short of earlier projections that it would reach the 5.5% mark. This means that the Kenyan economy grew by only 0.5% in 2013. 

Growth in the country’s two main economic pillars, agriculture and tourism, declined; however, the transport, electricity, water, mining and quarrying, wholesale and retail trade, communications and financial services sectors recorded
marginal gains. 

In 2012, agriculture, which is still the backbone of the country’s economy and accounts for more than 25% of this Eastern Africa nation’s economy, recorded a 4.2% growth. In 2013, this decreased to 2.9%. Tourist arrivals declined to 1.5m in 2013 from 1.7m in 2012.

The Economic Survey believes that the main cause of this decline has been the general rise in crime and incidents such as the highly publicised terrorist attacks, among them the Westgate siege. Ironically, however, while the tourism sector has performed poorly, investments in the hospitality industry increased in 2013. 

Kenyatta’s pet project, to provide free laptops to all children enrolling into primary school, became entangled in procurement intrigues. 

Based on the manifesto that propelled Uhuru Kenyatta to the Presidency, many had anticipated that he would increase the economic gains inherited from his predecessor, Mwai Kibaki. Instead, a number of setbacks have dominated the Jubilee coalition’s first anniversary. 

In one of the strongest editorials written since President Kenyatta took over, Kenya’s oldest daily, The Standard, asked him to borrow a leaf from President Kibaki’s economic book. ‘Expectations were high that the new government will trigger an impressive economic growth’, the editorial reads. ‘This has not happened. The economy expanded by 2.5% in Kibaki’s first year in 2003. The Jubilee coalition will have to read from Kibaki’s script on economic growth to bolster things’.

There have been a number of executive disasters. Kenyatta’s pet project, to provide free laptops to all children enrolling into primary school, became entangled in procurement intrigues. The Ksh 25bn ($287m) tender to supply 1.28m laptops was awarded to India’s Olive Telecoms but rival bidders, Hewlett Packard and Chinese electronic appliances manufacturer Haier, raised queries. The result was that the tender was cancelled by the Public Procurement Administrative Review Board. The laptop issue is now playing out in the Kenyan High Court. 

But economists say the laptops, even if it had been possible to roll them out as planned, are a populist red herring that has failed to disguise the fact that the economy seems to have stalled.

Soon after the laptop fiasco, Kenyatta and his deputy, William Ruto, took a 20% pay cut and demanded the same from public servants in state enterprises. This spurred a national debate on the public sector wage bill, with wide-ranging austerity measures being proposed to cut profligacy in government. According to the Ministry of Planning and Devolution, the public wage bill currently consumes 13% of the country’s GDP, 51% of the total government revenue.

The salaries that Kenya’s parliamentarians, ministers and other public servants pay themselves are some of the highest in the world and completely out of proportion to the size of the national economy or the contribution of the public sector to economic growth. This issue, which affects a number of African countries, is coming under increasing fire from national and international critics. Among the latest to fire a broadside from a pan-African perspective is our Editor Anver Versi.

 In the May 2014 issue he asks: ‘The question is, what is the public, which is paying for these salaries and perks, getting for its money? If legislators, whose policies have delivered wealthy, powerful countries, are constantly under the microscope, why are we forking out vast fortunes we can ill afford to keep MPs in clover when, so far, all they have delivered, by and large, is poverty, conflict, mismanagement, inefficiency and corruption?’.


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Written by African Business Magazine

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