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On the economy, we are missing the point

Tuesday August 27 2019

By BITANGE NDEMO
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In the recent past, media has been asking many questions regarding the economy. 

These questions include: If the economy is growing as the Government says, why then are employers laying off staff in large numbers? Why are non-performing loans increasing? Why are people defaulting on their mortgages and losing their properties? How come that the country lost its competitiveness in 2018 and sunk into a deficit of Sh156 million in trade within African?

TOUGH QUESTIONS

As media fills its pages with tough questions, it doesn’t take a genius to know that consumer spending is up. The country is bourgeoning with global brands in new malls, making our neighbours happy with huge food imports in excess of $1 billion in the first six months as well as changing lifestyle with more people increasingly eating outside the home as new global restaurants scamper for space to whet our increasing appetites for foreign foods.

What is going on?  These contradictions make it harder for any economist to predict whether we are headed for a recession or economic boom. 

If the economy is doing great as reflected in the GDP growth and we are petulant, then we are missing the opportunities that foreigners are seeing. 

It is perhaps time that we ask ourselves very difficult questions as a basis of understanding that which is trending in our economic environment.

Two malls, Sarit and Village Market, have expanded their facilities and virtually all the spaces have been taken by global brands. At least four new malls have sprung up also housing several international brands, these brands don’t just randomly invest in emerging markets. 

They do a lot of research beyond economic indicators like GDP per capita.

While we grumble that the government has not made us to think, non-Kenyans are seeing opportunity and exploiting it sometimes using inputs from their own countries.

It defeats logic when a mall the size of the Hub thrives with foreign restaurants and not a single local eatery. Most of these brands do not even use local flour and no one has bothered to find out including our often-avaricious MPs.

We are simply importing resources that make money for foreign companies then they ship it out as profits without ever contributing to the local economy. In most countries, you cannot import potatoes if the same can be produced locally. The onus is placed on the investor to train locals to produce potatoes of their standard requirement. 

In my view, we are relying too much on government to guide us to navigate complex economic issues. 

We must be part of the solution to economic performance.  In essence, we should wake up and exploit emerging opportunities.

The government cannot direct private citizens to areas of opportunity. It is the private citizen who takes the risk and exploits the opportunity and only seeks government assistance if there are unfair practices in the markets. 

LOCAL INVESTORS

Some of the multinationals misbehave and, in the process, undermine local investors.

It is common knowledge for example that Multinationals elsewhere are helping farmers in emerging economies to exploit opportunity and succeed. American giant retailer, Walmart, has a program called Direct Farm programme where the retailer buys directly from the farmers through its own distributor and guarantee steady market and access to finance. 

Walmart provides the training and advisory services to the farmers ensuring that the farmers meet their standards. 

As a result, they have managed to help small-scale farmers to build a sustainable farming programme.

In Kenya however, we have no legislation compelling multinationals to use local resources.

What pride do we have in such a situation?  An English proverb says, “You can't eat your cake and have it.”  In my translation, it means that once pride is enjoyed, it is gone and if you want to sustain it, then you must make sacrifices. 

We pride ourselves that in Kenya you can enjoy many restaurants but that is where it stops.  We could take this further and begin to share the cake of economic prosperity.

Economic growth is only beneficial to the people at the bottom of the pyramid if the resources can trickle down. There is so much information asymmetry that only a few really know what is going on within the economy. 

Sometimes this is deliberate by a few to mint money out of our own ignorance.  In the long run, we must figure out how the gap between the rich and the poor must be narrowed.

As we deal with ways of enabling citizens to build sustainable farming, we must tackle the entrepreneurial gaps that exist in emerging economies.

While most businesspeople simply duplicate enterprises their neighbours have built, there is need to helping others start imitating new business models of foreign enterprises. Asia’s Newly Industrialised economies faked their way until they started to innovate on their own. 

When citizens and the media grumble and foreign entities continue to enjoy the benefits of economic expansion, we are failing to understand our economy and exploit available opportunities. 

 

The writer is a professor of entrepreneurship at University of Nairobi’s School of Business.