To grow economy in 2018, we must get it right in these areas

A fishmonger prepares a 40Kg Nile perch for slaughter at Top Market in Nakuru in 2013. PHOTO | SULEIMAN MBATIAH | NATION MEDIA GROUP

What you need to know:

  • The reality is that a 4-5 per cent growth will not yield us the 2030 targets that we have set ourselves.

  • Besides pushing the companies to process the mineral as much as possible locally, we must ensure that the benefits are more than just some blue collar employment.

  • We must stop assessing success by how many foreign companies have set up and instead evaluate their linkages to the local stakeholders.

The year 2017 has been a pretty mixed one for business. First, the electioneering in the second half of the year put paid to any hopes of growth for most of the sectors. The banks particularly, already reeling from a fixed cap regime, will turn out to be the hardest hit. Agriculture, too, suffered from drought earlier in the year. However, tourism will probably record the best earnings yet as foreign visitors seem to have bounced back and, with better infrastructure, even local tourism is on the up.

Overall, the economy missed forecasts and with many sectors below their own budgets and like the previous year, its unlikely that the exchequer will raise enough funds to meet its obligations.

This may see our debt inching upwards to critical levels but one hopes the money will be put into capital, not operational stuff so that it can yield dividends in the medium term.

GROWTH

The reality, however, is that a 4-5 per cent growth will not yield us the 2030 targets that we have set ourselves. We need to critically think about what we need to do to generate enough revenue to spur the economy towards seven-plus percentage  growth.

One key thing that we must do is to ensure that we get the best deals from our minerals. That a company can come and mine, gets some tax holidays, get VAT refunds (because they have no output VAT as they export semi raw minerals), is no longer tenable.

Besides pushing the companies to process the mineral as much as possible locally, we must ensure that the benefits are more than just some blue collar employment. Fluorspar mining that has now come to an end should offer useful lessons on how not to contract as  the country has little to show in spite the mineral at some point being one of our biggest exports!

TULLOW OIL

In the same vein, one must appreciate the contracting process of Tullow Oil  which involved a tripartite arrangement of the local community, the government and the investors .That’s the way to deal on a mineral that has been found in a community’s heartland. Better deals on the minerals, including soda ash, gold, titanium, coal and manganese will give the government more revenue to put in infrastructure and other areas to help spur growth.

President John Magufuli of Tanzania has put forward a great minerals strategy which gives way more benefits to Tanzanians and should be supported by all people of good will to ensure that this vast industry can be the backbone of Tanzania’s industrialisation.

Another key area to tackle is manufacturing. I am pleased President Kenyatta has declared it a key pillar for his last term. Manufacturing offers the best opportunity for creating jobs and taxes for the government. To drive this sector sustainably, we have to focus on incentivising local companies to grow and compete in the regional arena.

COMESA

Our competitors, for instance, are Comesa countries like Egypt where energy costs are about three US cents per kilowatt hour compared to about 11 cents for Kenya. What incentives can the Kenyan government offer to create a more even play field ? Lower tariffs for industries? Lower VAT for inputs especially for export-orientated goods? Lower corporate tax?

The companies that will drive this economy are the local companies and we must in a very real way offer them credible incentives even as we attract foreign players.

We must also have a solid way of creating forward and backward linkages that help to create employment and build industries.

For instance, we must drive the growing of palm oil in the Coast region because there are enough local processors of edible oil in the country but they have, unfortunately, to import from Malaysia.

Or the growth of pyrethrum because there are enough processors of insecticides instead of importing synthetic insecticides into the country.

FARMING

Farming of oranges, mangoes and lemons should be encouraged because there are enough processors of fruit juices. There is no reason today to import passion fruit or pineapple or orange concentrates by manufacturing companies. It’s an unnecessary drain on foreign exchange. Encourage large scale growing of sugar in the Tana River basin because it would bring down the unit costs of sugar and get the western part of Kenya to invest their energies in another crop like cotton which would be great for AGOA, or even maize.

Get large scale cultivation of fish and ensure there are world class processors for exports instead of importing Tilapia from China (some of it plastic) as is happening today.

We must stop assessing success by how many foreign companies have set up and instead evaluate their linkages to the local stakeholders.

PROFITABLE

This starts with some local shareholding so that some of the accruing benefits can be shared with the local population. My best example of such an investor has always been His Highness the Aga Khan.

His business philosophy has been one of partnering with the local people and so as soon as most of his businesses became profitable, he put them in the stock exchange to share in the wealth created. These include Nation Media Group, Serena hotels, Jubilee insurance and Diamond Trust Bank.

These are the kind of investors the country needs who in addition have created other not-for-profit businesses like the schools and hospitals.

Many multinationals can borrow a leaf from this model.

ONLINE SHOPPING

Supermarkets and self-service stores are the models for the immediate future before they too are overtaken by online shopping.

One of the biggest impacts on business in the last two years has been the debt level that the supermarkets owe businesses in the country.

They have used suppliers cash to expand without commensurate management depth and the result has been collapse of the outlets with suppliers’ cash.

The government would do well to regulate the debt levels by passing a law on payment terms particularly for small businesses to protect them from greedy traders.

Finally, we Kenyans and our government must figure out how to relate in as far as strikes are concerned in the public sector.

Mr Gitahi is the chairman, Tropikal Brands (Africa) Ltd ([email protected])