The Kenyan Economy: Separating Facts from Propaganda

By Steve Biko Wafula / July 19, 2016 | 7:44 am



Kenya's Current Account Deficit Widens in Third Quarter by 28.9 per cent

Online conversations of late have centered around the essence of pay and how much particular careers pay and what not. People have shared their view and thoughts and blogs have been written to storify and repudiate the same.

This has got me thinking, if our economy is growing at 5.9% and everything is rosy and dandy, then why are  we complaining about how expensive tomatoes are and how buying a cob of roasted maize is a big challenge and how a PhD holder who is a higher education lecturer earns peanuts?

If we are doing so well that world leaders are visiting us every month and our dear President is forever travelling every week, then why is KRA having serious problems meeting its revenue collection targets and why is the treasury operating on a dangerous deficit? Why are the beloved middle class complaining about increasing fuel costs? At 5.9% growth, as Economist @Nderi_J jokingly puts it, everyone should be 5.9% better off but is that the case?

Last week middle class folks took to their favorite street called Twitter and lamented just how expensive life had become. They whined under the hashtag #CutCostOfLiving and to be honest, I laughed my head off, because everyone seemed to have missed the point.

The reason why living costs have sky rocketed is simple. Our economy has structural deficiencies that cannot be fixed in a day or year and given that election time, this is a problem that no single leader is going to bother with. The problems are deep rooted but we simply have opted to ignore them or create and develop policies that can be able to nurture a new foundation of our economy. In essence, our economy is virtually inverted. Someone on twitter put it aptly. Out with the factories, farmers, producers and in with the betting and gamblers. The core sectors that form the foundation of any economy are non-existent. We are a net import country and we seem to be clapping our hands at this. The bottom of the pyramid is critical to any economy, the key sectors must strive to serve this group, but in Kenya, this group is at the behest of tenderpreneurs. IPSOS in their enigmatic research indicated that more and more Kenyans are going to bed hungry and honestly, hunger is the mother of crime for many who have no options.

Read: Negative Perception on Corruption Among Kenyans at 74 percent

So, how do we tell our economy is growing and its growing well? How do we ascertain this 5.9% and vouch for it? How do we read the truth from the propaganda? What must we look for? As an ordinary Kenyan, with no economics background, how can I trust the numbers that are coming out of government?

According to Investopedia, the best way to read an economy is by looking at key factors like income. Income is one of the most significant factors in measuring economic performance, and gross domestic product (GDP) is the most commonly used measure of a country’s economic activity. In short, GDP reflects the value of all final goods and services legally produced in an economy in a given time period.

Traditionally, the key measures of economic performance in macro-economics include:

  1. Economic growth – real GDP growth.
  2. Inflation – e.g. target CPI inflation of 2%
  3. Unemployment – target of full employment
  4. Current account – satisfactory current account, e.g. low deficit.

The GDP in Kenya expanded 5.9 percent year-on-year in the first quarter of 2016, following a 5.7 percent increase in the previous period. Kenya Inflation Rate at 3-Month High of 5.8% in June. Consumer prices in Kenya increased 5.8 percent year-on-year in June of 2016, accelerating from a 5 percent rise a month earlier. It was the highest figure since March 2016, driven by cost of food. 80% of unemployed Kenyans are below 35 years old as 35%, compared to the overall national unemployment rate of 10% according the guardian online magazine. Kenya recorded a Current Account deficit of 140.92 USD Million in March of 2016. Current Account in Kenya averaged -199.99 USD Million from 1994 until 2016.

Read: Government Ahead of its Domestic Borrowing

Of these indicators, economic growth is usually the most importance and given the greatest credence for economic performance. It is frequently used for international comparisons and is probably the most prominent statistic. Politicians can use GDP statistics as a trump card – as if a quarterly growth of 1.0% vindicates all economic policy.

From the same website, we see that  real GDP metrics has several limitations and my economist friend @nderi_j would certainly agree to this. Not least is the fact that it is not always a reliable guide to living standards. With stagnant wages, cost push inflation and a rising population, average median incomes have fallen in the recent decade.

The Fabian think tank believes that median income would give a better indicator to overall economic performance. They also state other indicators which would help give better impression of economy.

  • Rate of National debt reductions
  • Level of greenhouse emissions
  • Income inequality
  • Labour productivity
  • Intermediate skills
  • Affordable homes
  • Incidence of low pay
  • Employment rates

From above we can see that our economy seems to be doing well, at least on paper. What is the rate of our national debt? This GOK is amassing debts on a daily basis, I am afraid for my grandkids and their grand kids on how they will pay for them, especially given the fact that we are net import country. We produce zero. And whatever we produce, our standards are so poor, it can never be seen on international markets unless through agreements like AGOA.

Read: Kenya’s Economy: State of Unemployment

Farmers are hard hit. Let’s start with Miraa farmers. Their key markets in Europe and Somalia have hit a serious snag. Coffee is in a mess, tea is headed there, pyrethrum died a long time ago, sugarcane is in ICU, cotton was buried ages ago, flowers were hit by poor management and toxic chemicals not to mention lack of infrastructure to help commodity farmers like tomatoes et al who are dying daily at the hands of middle men.

Move to manufacturing and its really expensive to build a factory here. Bad politics. Corruption. Expensive energy supply, which is not sustainable. A revenue authority keen on killing the goose that lays the golden egg and bad legislative policies that make us totally noncompetitive. Something that was affirmed by the Kenya Association of Manufacturers (KAM).

Read: Increased Regulation Will Make Kenya Uncompetitive for Business -KAM CEO

Other areas like tourism, technology, logistics are facing more or less similar challenges. This means;

  1. Less or no jobs created
  2. Reduced purchasing power by the citizens
  3. Increasing crime waves
  4. Reduced saving power hence reduced investments
  5. Increasing economic crime and sabotage
  6. Increased malnutrition amongst the children of lower class
  7. Increasing debt levels for both the country and individuals
  8. Increasing levels of corruption, nepotism and embezzlement
  9. Increasing rates of school dropouts at all levels.
  10. Increased auctions.

The above is what most of us are feeling. That’s what we are going through. 

Read: Tougher Days Ahead as Fuel Prices Increased

When you buy the Monday paper, whichever; Daily Nation or The Standard; the number of people whose property is being auctioned is increasing every week and it’s a real worry. Illicit money is flourishing in the economy and no one would dare admit it. We have broken basic engagement laws and regulations to achieve maximum profit at the expense of our health. The number of harambees happening daily to fund medical trips to India has grown 100 fold. Our health is at risk as the quality of what we eat and what goes into our bodies is often questionable and there seems to be no one to be held accountable for that.

For me, the above 10 negative factors are the best way to measure the performance of an economy. I believe Western economists have never met our mama mboga and the duka guy and how they operate with us and how the credit cycle with these two and the middle class is holy ground. What is your formula?

 





About Steve Biko Wafula

Steve Biko is the CEO OF Soko Directory and the founder of Hidalgo Group of Companies. Steve is currently developing his career in law, finance, entrepreneurship and digital consultancy; and has been implementing consultancy assignments for client organizations comprising of trainings besides capacity building in entrepreneurial matters.He can be reached on: +254 20 510 1124 or Email: info@sokodirectory.com

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