Economy needs to move to a new productive age

Has the administration of President Uhuru Kenyatta introduced a change of approach in the management of public affairs?

Has the experiment with a cabinet made of technocrats worked? Opinion remains divided.

In terms of management style, you have to scratch your brains to see anything that suggests that the Jubilee administration’s cabinet of technocrat’s approach to public management is any different or qualitatively better than what that of politicians we were used to in the past.

A cabinet minister enjoyed a very high public profile in the past.

Today, some of the cabinet secretaries don’t have a public profile and cannot be noticed in a crowd.

And, shedding the mental baggage and practices of the past — appointing cronies to plum positions and engaging in tender wars — has become a problem to the technocratic cabinet ministers.

However, this is not to say that the introduction of the technocrats into public administration space has been a disaster.

A good number of cabinet secretaries have approached their jobs with a sense of professionalism hitherto unknown in the civil service.

In the Agriculture docket, for example, Cabinet Secretary Felix Kosgey has braved immense political pressure to execute a clever turnaround plan for the troubled Mumias Sugar Company.

It is a radical formula that will remove Mumias from the clutches of a clique of distributors and their allies within the board of the company.

My star performer is Health Cabinet Secretary James Macharia.

He has employed his years of experience in managing asset leasing programmes in the private sector to roll out a multi-million dollar leasing project with internationally-renowned medical equipment manufacturers that is bound to change delivery of health services in major ways.

A former CEO of NIC Bank, he is living proof of how a private sector technocrat appointed to the Cabinet to inject new ideas can leverage his private sector experience to make a difference in public service delivery.

The parastatal reform programme, which was informed by the a task force headed by presidential adviser Abdikadir Mohammmed,  is clearly one of President Kenyatta signature projects.

STALLED REFORMS

By far the most ambitious attempt to reform the corporate governance of parastatals, it also proposed mergers of several parastatals.

A year later, not a single of the clever ideas has been implemented. The creation of a single financial sector regulator has stalled.

The proposed Government Investment Corporation (GIC) is yet to be put in place.

The National Treasury and the task force appear to be pulling in different directions over the proposed Sovereign Wealth Fund.

Another key reform idea that has stalled is the proposal by President Kenyatta to consolidate some of the State-owned banks.

It is an urgent matter because two the State-owned banks failed to meet capital adequacy requirements by the Central Bank of Kenya this year.

Consequently, the licence for the National Bank of Kenya was not renewed in January.

Achievement in public financial management, another key area crying for radical reforms, has been modest, to say the least.

The introduction of the so-called Treasury Single Account is taking too long.

Yet the case for this innovation is very strong indeed.

When you have a treasury single account you are able to see and know all the cash and bank balances in all government accounts from inside and outside the Central Bank of Kenya at any point in time.

Currently, it is not possible to site all cash belonging to the government outside the small number of accounts held by the Central Bank.

A study by the International Monetary Fund in 2012 estimated that the government has a total of 10,000 bank accounts held in commercial banks.

Another study conducted under the World Bank-sponsored Public Expenditure and Financial Programme estimated that approximately 60 per cent of government accounts were situated outside the Central Bank.

How can one plan and forecast cash flows is such a messy environment?

Neither has the administration performed very well in implementation of the Integrated Financial Management System.

This is a key area in reform of public financial management.

In truth, the financial management system has been oversold as a great success by the Jubilee administration.

Yet, while it is true that a great deal has been accomplished, the state of financial reporting of government accounts remains dismal.

Today, if President Kenyatta wants to see a consolidated position on what the government spent on advertising in any one month, he will not be able to extract that information from the financial management system at the touch of a button.

In countries like South Africa, the transparency of government financial operations is high because they have deployed core systems which allow ministries to produce complete financial reports on a monthly basis.

Here, the system in place is not robust enough to yield audited financial statements within months of the end of the financial year.

KEPT EXPENDITURE IN INFRASTRUCTURE

What are the strong points for Jubilee? They have kept expenditure on infrastructure — railways, ports, roads and electricity high.

Implementation of the standard gauge railway, considered to be President Kenyatta’s flagship project, is progressing well.

Implementation of the Galana irrigation project, touted as the country’s solution to the perennial problem of food security, has been fair.

While it is becoming increasingly clear that the 5000Mw project will not be achieved within the set timeframe, spectacular progress has been achieved in completion of geothermal power projects.

The country’s dependence on the unpredictable hydro-electricity and on thermal plants will sooner or later be history.

Although the multi-billion Konza techno city project has experienced major delays, recent developments suggest that it is on course.

In a report published this week, the World Bank has painted a rosy picture, stating that Kenya is set to be one of the fastest growing economies in sub Saharan Africa. The report attributes the performance on falling oil prices and high spending on infrastructure, especially energy and the standard gauge railway.

According to the Bank, an expansive fiscal policy stance has allowed the government to finance major infrastructure projects without putting excessive pressure on domestic financing.

The challenges. According to the World Bank, the main problem going forward will be the widening current account.

Clearly, we have to do something to reinvigorate the exporting sector.

Tea , coffee and horticulture need radical interventions. Revival of tourism is urgent.

What sort of economy do we want in the future? What strikes one is the absence of any fundamental debate or strategic view of the economy.

From  both sides of the political divide, there is no real political discussion about economic options for Kenya beyond what is states in Vision 2030.

There is a limit to where growth from debt-financed spending and a credit-backed rise in property prices  and  paper assets can take you.

We need a consensus on what should be done about taking the economy forward into a new productive age.

We must refocus on how to reset and renew the economy’s productive engines.