Kenya in doldrums despite economic growth - Daily Nation

Kenya in doldrums despite economic growth

Sunday September 9 2018

Treasury

National Treasury Cabinet Secretary Henry Rotich speaks during the Africa50 annual general meeting at Villa Rosa Kempinski Hotel in Nairobi in August 2018. There has been failed austerity in both national and county governments. PHOTO | FILE | NATION MEDIA GROUP  

By EDWIN OKOTH
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Two months before the August 2017 elections, President Uhuru Kenyatta, who was seeking a second term in office, outlined his manifesto with the key theme being austerity.

His Jubilee Party pledged to reduce wastage in government to save up to Sh1 trillion in the next five years.

So important was austerity that even the then opposition Nasa made a similar pledge, whose achievement was hinged on the establishment of prudent fiscal policies and strict public finance management systems.

Jubilee, whose presidential ticket of Mr Kenyatta and running-mate William Ruto eventually won in a controversial October repeat poll after the Supreme Court nullified the August victory, had planned to establish a General Services Agency (GSA) to manage and support the basic administrative functioning of government, procure all supplies and services, communications, transportation and office space.

WAGE BILL

That was on paper. After running a relatively lean Cabinet in his first term, the President announced a bloated team that included Mr Raphael Tuju as Cabinet Secretary without portfolio and the amorphous role of Chief Administrative Secretary that critics said introduced assistant ministers through the backdoor.

This flew in the face of a broader debate on the wage bill that in 2014 prompted Mr Kenyatta and Mr Ruto to announce they would take a 20 percent pay cut — something that was supposed to apply to Cabinet Secretaries and parastatal heads on different scales.

It is not clear how far this initiative went beyond the public announcements.

Significantly, the CAS positions come with privileges like staff, vehicles, security and other expenses that have kept the public wage bill strained and betrayed the promise to tame wasteful spending.

Also, ministries have principal secretaries, directors and other senior technical staff.

TAXATION

Economists contend that the government would not have had to go for poor Kenyans in punitive taxation, including the controversial 16 percent Value Added Tax on fuel, had there been attempts to tame wasteful spending.

“There is no silver bullet. As long as we are spending more than we can raise, we have to take all the consequences of living beyond our means.

"We have to cut expenditure. It is not rocket science to see where money is being wasted,” Dr Paul Gachanja, chairman of the Economics Department at Kenyatta University, told the Sunday Nation.

With years of failed austerity in both national and county governments, poor Kenyans have had to shoulder the burden of those in power, with the VAT controversy stirring fresh debate on the economy and debt burden.

Public display of opulence at a time when many Kenyans are straining to cope with the high cost of living has not made things any better.

POVERTY

According to British non-profit group Oxfam International, extreme inequality is getting out of control in Kenya, with only a few enjoying the fruits of economic growth and with no trickle down effect on poor Kenyans.

In a December 2017 report titled "Taxing for a More Equal Kenya: A five-point action plan to tackle inequality", Oxfam said less than 0.1 percent of the population (8,300 people) own more wealth than the bottom 99.9 percent (more than 44 million people).

“The richest 10 percent of people in Kenya earned on average 23 times more than the poorest 10 percent. While this minority of super-rich Kenyans are accumulating wealth and income, the fruits of economic growth are failing to trickle down to the poorest,” Oxfam said in the report.

Pundits contend that public anger at manifestations of such wide inequalities may become hard to deal with as the government focuses on bridging budgetary gulfs created through expensive borrowing to fund ambitious projects like the Standard Gauge Railway, with little positive impact on the poor.

INCLUSIVE DEVELOPMENT

University of Nairobi Business School Associate Professor Bitange Ndemo says years of project planning that sources money from the poor but fails to include them in the developments is a recipe for chaos.

Dr Ndemo said the pressure is increasingly becoming unbearable for the poor, who are now being forced to shoulder the cost of economic mismanagement.

“If we don’t use the concept of inclusive development, then these poor people will begin feeling left behind in the economic growth story and start standing against some development agenda.

"One cannot assume that those people in the slums are not watching what is going on and comments being made by some public figures, which essentially underline the insensitivity exhibited in government cycles,” Dr Ndemo said.

When Kenyans were still enraged by the introduction of 16 percent VAT on fuel last weekend, Deputy President William Ruto on Monday morning bought 1,400 goats collectively valued at Sh10 million at a goat auction in Kajiado County.

GOAT AUCTION

The goats, which Mr Ruto said belonged to him and President Kenyatta, were bought in cash stashed in a black backpack, which was handed to the host, Kajiado Governor Joseph ole Lenku.

The video that went viral after the action has been a subject of great discussion, with many Kenyans seeing the purchase as insensitive.

Equity Bank chief executive officer James Mwangi, who is also the Vision 2030 Delivery Board chairman, also stoked public outrage when he supported the fuel tax, saying it is the pain Kenyans must experience to enjoy the fruits of transformation, adding that people must “tighten their belts”.

Earlier in the year, MPs had pushed Treasury to grant them Sh5 million shillings each as grants after scattering attempts by the Salaries and Remuneration Commission to remove these perks.

The MPs and Senators, who earn more than Sh1 million each every month, due to allowances — including Sh5,000 sitting allowance every time they clock in for the plenary session and Sh5,000 each for committee sitting — have been widely criticised for burdening Kenyans.

“Have you wondered why no one at Treasury ever talks about austerity but keeps singing about more revenue?

"MPs should be the first group to be targeted. The government is focusing on the wrong solution; it’s not about more revenue now, it’s about reducing expenditure,” Nairobi-based economic analyst Gitau Githogo said.

EXPENDITURE

Mr Githogo said perennial budget increases have not been consistent with a rise in revenues, placing Kenya in the current economic odds.

Official data show that the gross estimated Government expenditure almost doubled between 2012 and 2016, rising by 93 percent to Sh2.2 trillion.

This is higher than the 60 percent rise in revenues and 126 percent rise in public debt over the same period.

Expenditure reduction plans like the planned merger of parastatals in line with recommendations of a 2013 report by a parastatal reforms task force appointed by President Kenyatta, have largely been shelved.

Another one dubbed Capacity Assessment and Rationalisation of the Public Service Programme that would see weeding out of ghost workers and eliminate duplication of duties, has also been gathering dust after gobbling money developing strategies.

Other previous austerity measures that have not been fully enforced include a ban on fuel guzzlers, reduction of the money spent on flowers and refreshments, and streamlining of procurement to lower the inflated prices government pays for goods and services.