Business leadership cannot be a substitute for sound economic advice
What you need to know:
- Nearly two months ago, I was privileged to attend the two-day Africa Rising conference, which was jointly hosted by the government of Mozambique and the International Monetary Fund (IMF).
- Curiously absent from the discourse by these representatives was any mention of the risks to the good growth momentum now happening, and that may be starting to peter out.
- That the organizations that interact with the public sector to project the voice of private enterprise blatantly advertised unsound economic reasoning is no crime, and does not detract from their ability to competently run firms.
Whenever Kenya is compared with the rest of the region and selected countries on the continent, the elevated activity of its private sector and the capability of its business managers is constantly highlighted.
In many respects this praise and recognition is well deserved, and credit is rightly given for the fact that there are highly agile firms to speak of after fifty years of very poor policy choices. After all, running a business enterprise with enormous strictures from the state and favouritism for some firms or industries requires very deft management.
However, it’s obvious that the skills and methods that were developed while navigating a state bureaucracy hostile to some independent businesspeople has stuck for far too long with Kenya’s business associations and its leadership.
I illustrate this below, and highlight what effects this may have on business growth and the perception by other Kenyans on the legitimacy of economic outcomes in Kenya.
ELEPHANT IN THE ROOM
Nearly two months ago, I was privileged to attend the two-day Africa Rising conference, which was jointly hosted by the government of Mozambique and the International Monetary Fund (IMF).
This conference highlighted the undeniably impressive progress that a number of African countries have made to get growth going and improve people’s lives. In that conference were a number of recognized business leaders from Kenya and the region.
Curiously absent from the discourse by these representatives was any mention of the risks to the good growth momentum now happening, and that may be starting to peter out. Only a single Kenyan business leader conceded that the main “elephant in the room” was corruption and alluded to the need for business leaders not to wish it away as a major and persistent threat to growth.
Equally puzzling was the statement issued by a consortium of Kenya’s business groups a month ago regarding the payment of nearly US$20 million to an unknown firm for services that the firm’s executive admits were not provided.
Business associations of all kinds are completely at liberty as persons recognized by Kenya’s laws to support any policy initiative. In a newsletter that I received about that statement, I was surprised to see leading business associations resort to “voodoo economics” reasoning to justify bad and unpopular economic policy.
UNSOUND REASONING
The newsletter acknowledges discomfort in endorsing that payment to unknown persons, but considered it necessary to ensure a successful launch of the sovereign bond expected soon after.
It proceeded to argue further that the issuance of a sovereign bond on the terms sought by Kenya would ensure that Kenyan firms would face a low interest-rate environment.
It is difficult to believe that business professionals who run firms with revenues of hundreds of millions of shillings would support a public policy initiative on such unsound reasoning.
Again, it’s perfectly acceptable to state that this business association supports that payment of public funds for unstated reasons, but it lies ill in the mouth of business associations to publish statements supporting an economic policy initiative based on patently unsound economic analysis.
Granted, they were using the same logic used by the state to justify that payment, but that claim had been shown up for its lack of logic, and was not presented to the legislature when Parliament received the policy statement accompanying the speech by the Cabinet Secretary.
POLITICAL PARTISANSHIP
Thus to any student and dispassionate observer, the selected business leaders and the associations made the choice to support the payment of public funds in an environment that the public and watchdog bodies had advised against, but tried to couch that justification in “D” grade economics analysis.
The lesson from this is that political partisanship is difficult to hide under “D” grade economics analysis.
That the organizations that interact with the public sector to project the voice of private enterprise blatantly advertised unsound economic reasoning is no crime, and does not detract from their ability to competently run firms.
In a nation in which policy innovation is imperative, and in which the voice of private firm owners is gaining respect, the possibility of public discourse being infected with blatantly unsound economic reasoning requires deep contemplation.
In addition, growing respect for the private sector’s voice should be complemented with honesty about the challenges to growth, including an admission that the public sector should tackle corruption.
For the public, it’s worthwhile to recall that a businessperson in Kenya, however successful, must not be mistaken for a competent economist.
Kwame Owino is the Chief Executive Officer of the Institute of Economic Affairs (IEA-Kenya), a public policy think tank based in Nairobi. Twitter: @IEAKwame
