I found myself reflecting on what President Uhuru Kenyatta could do differently from his predecessor in terms of managing the economy.
Here is my two cents worth. Methinks that former President, Mr Mwai Kibaki, did not give adequate attention to the running of parastatals. He allowed ministers too much leeway to meddle in the affairs of these valuable national assets.
Yet we all know that this economy cannot experience a sustainable take-off if the cost of electricity remains prohibitive — if industrialists can’t get imported inputs here on time because of an inefficient port and if Nairobi were to lose its position as the transport hub of the region because of a poorly run international airport.
You can’t move the economy ahead if you do not take a keen interest in the running of parastatals- especially the large utilities providing critical infrastructure such as the Kenya Ports Authority, Kenya Airports Authority, Kenya Power, KenGen, Kenya Pipeline, Geothermal Development Corporation, Kenya Electricity Transmission Company and Kenya Railways Corporation.
Ministers and permanent secretaries have also been interfering in the management of regulatory agencies. Going forward, the running of these key assets will need one co-ordinating hand operating independently and enjoying political support from the very top.
Indeed, this is the lesson that came through during implementation of the Lamu Port corridor projects. It became difficult to manage the multiple institutions involved in implementing different parts of the project.
I also think that we have not yet taken full advantage of the fact that the State today has a significant stake in the banking sector. Neither have we taken advantage of the fact that six of the top ten commercial banks are local.
The government sits on massive wealth in the ownership of shares of listed companies, including Safaricom, Kenya Airways, East Africa Portland Cement, Mumias Sugar and many others. Mr Kenyatta should consider creating a sovereign wealth fund which can unlock some of this wealth so that it can be invested in infrastructure.
We are sitting on what could possibly one of the largest sources of investible surpluses. If we want parastatals to play their rightful role, the corporate governance regime must be overhauled immediately.
President Kenyatta made too many promises in his manifesto. To take off, he will need a few quick wins.
My own sense is that as reality sets in, he will soon realise that the fiscal space to accommodate some of the promises he made just doesn’t exist.
The new government is coming in at time when public finances are not in a good shape. The advantage his predecessor had was the fact he took over at a time when the economy had suffered years of under-investment by the state.
The first thing the then Finance Minister David Mwiraria did was to suspend all procurement officers in the public sector.
They opened the purse strings and threw money at free primary education, construction of roads water projects and building fibre optic cables. They pumped money in restructuring the KCC, bailing out Uchumi Supermarkets and promised to revive the Kenya Meat Commission and the Kenya Farmers Association.
In the first year, the budget for roads increased threefold. In his first budget, Mr Mwiraria made the unprecedented move of lowering the cash ratio by a huge margin. Interest rates came down massively and the private sector started borrowing again.
Banks started giving out consumer loans. By the end of 2004, the rate of the 91-day Treasury Bills had come down to one per cent.
By 2006, the economy grew by seven per cent, the highest level in two decades.
President Kenyatta is taking over under different circumstances. Monetary policy is stretched. Domestic debt has ballooned, and the wage bill is at an unsustainable levels. Interest on gross domestic debt increased by Sh122 billion between June 2012 and the end of March this year.
Steering the economy to the next level will be President Kenyatta’s biggest challenge.