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Why does the Budget ignore pillars of Vision 2030 economic blueprint?

Tuesday June 16 2015

Finance Cabinet Secretary Henry Rotich reads the 2015-2016 budget in Parliament on June 11, 2015.  PHOTO | FILE |

Finance Cabinet Secretary Henry Rotich reads the 2015-2016 budget in Parliament on June 11, 2015. PHOTO | FILE |  NATION MEDIA GROUP

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Cabinet secretary Henry Rotich said many good things in his Budget speech last week. I choose to look at some of what he did not say and do.

As I read the statement, I get the impression that we are slowly drifting away from our long-term economic blueprint — Vision 2030 — and here is why.

Without a doubt, and to a very large extent, the Cabinet secretary walked the path of Vision 2030, but reading through the speech and the budget allocations critically, you will not fail to notice disconnects with Vision 2030. Take agriculture — the key pillar under Vision 2030 — for example. I do not see the big budgetary allocations to take us into processing and to propel us up the value chain.

More than 50 years after independence, we are still exporting tea in bags. Vision 2030 gives weight to diversifying agricultural production by removing constraints on agricultural production, mechanisation, irrigation, and land consolidation.

Apart from the Galana project, I do not see the budgetary allocations to re-invigorate agricultural production to the levels anticipated under Vision 2030.

I  do not know where and when we came to de-emphasise plans to de-risk  agriculture by introducing crop insurance and improving  availability of  credit. We forget that  in much of the 1980s — in the days of directed credit and administratively set interest rates, the government used to compel commercial banks to allocate at least 17 per cent of their deposit base to agricultural lending.


Today, lending to agriculture is below 5 per cent of the deposit base of the banking sector. I do not have to belabour this point.

I read a major disconnect between Vision 2030 and this year’s Budget on the treatment of the most important pillar in our long-term economic blueprint.

Another key pillar under Vision 2030 — manufacturing — has also been treated shabbily by our budget makers.

Granted, there is a mention of tax incentives for construction of industrial parks. When did we agree that we should de-emphasise the idea of fully-fledged special economic zones?

Whether you are talking about Singapore, Taiwan, Malaysia, Philipines, or Dubai, the key intervention  that revived manufacturing in those countries was development of special economic zones.

Here, the Special Economic Zones Bill has been stuck in Parliament since  2012. What happened to the National Competitiveness Bill and the proposed national competitiveness council?

Then there is this masterplan for industrialisation which was developed with the support of JICA. Why have we decided to leave it on the shelves to gather dust?

Clearly, manufacturing was not as high a priority for the makers of this year’s Budget as it is under Vision 2030.

Neither did tourism fair too well in the Budget. Under Vision 2030, among the flagship projects are development of resort cities in Isiolo, Lamu, and Diani.

Granted, billions of shillings have been allocated to marketing. Is this money going to the Kenya Tourist Board or directly to a lobby group in London?

Without a doubt, selling Kenya is important, but in the long run, it works better when at the same time you allocate money to build what tourists will be coming to see. Vision 2030 emphasises diversification of Kenya’s tourism product.

The idea of increasing minimum capitalisation for banks to Sh5 billion makes a lot of sense to me. Many of the small banks we have  today only do deposit-taking and lending business and are not engaged in areas such as investment banking, structured finance, and services that produce fee-based income.

If they cannot raise the money, they have the option of applying for micro-finance lending licences.  They should not insist that they be called banks.

Spending big on security and infrastructure, as the Budget has done, is the right thing to do, but at the end of the day, we must not forget that these are but “enablers” to support the engines of production.

The real economy continues to bump along in the doldrums. Kenya has more profound economic problems than can be addressed through wholesale renewal of agriculture and manufacturing.