New laws set stage for economic takeoff

The New Constitution has ushered in a new economic era for the country.

The immediate payback of the new law is “economic confidence”, that will trigger an inflow of capital into the economy.

We still have two years of the current coalition government within which to consolidate the gains of the new constitution.

The expectations and hopes born out of the new constitution will definitely shape the presidency that comes after 2012.

That is why we need to trace the economic history of this country to see where we have succeeded and where we failed, so that we can apply lessons learned in selecting the right type of government to shape the country in future.

The First presidency defined Kenya as capitalist with agriculture and industry as key GDP movers.

To create human capacity, the country immediately embarked on creating a strong and professional public service that was unrivalled in the region.

A needs-based education system was prioritized and matched to meet the skills required in all sectors.

Agriculture was prioritized and institutions created to support extension services, marketing and value addition in all agricultural sectors (sugar, coffee, tea, dairy, beef, pork, cotton, maize, wheat, rice and pyrethrum ).

A strong co-operative movement was created to mobilize rural agricultural potential with financial back-up coming from institutions such as Agricultural Finance Corporation and the Co-Op Bank.

Quality agricultural inputs and equipment were supplied by Kenya Farmers Association.

Irrigation infrastructure was set up especially for rice and cotton production.

To complete the agricultural production chain, marketing boards were either created or strengthened to market and process agricultural produce.

Sugar factories, textile mills, creameries, beef and pork processing, cereals milling, tea and coffee processing, all became major employers.

Exports were generated thus strengthening the balance of payment.

The next phase was to industrialize the economy and substitute imports with locally produced goods, while strengthening the supply chains with commercial empowerment.

For this purpose institutions such as Industrial & Commercial Development Corporation, and Kenya Industrial Estates were created to promote industries and commerce at both large scale and SME levels.

Institutions such as national banks, were to provide capital and credit.

Locally produced goods were deliberately protected as they progressed to improve standards and competitiveness.

Unwavering donor support provided the necessary grants to establish a modern infrastructure of roads, airports, power plants, irrigation systems etc

By the mid 1970s one would have said that Kenya was economically at par with countries like Malaysia.

However as soon as the country transitioned to the second presidency, it became obvious that Kenya had lost its economic direction.

Nearly all the previous economic ally enabling parastatals were systematically mismanaged, definitely looted and finally reduced to virtual impotence.

This reversed most of the gains made in agriculture, industry, commerce, finance and education.

The hitherto professional public service was weakened by replacements with obvious greenhorns, as meritocracy ceased to apply.

Higher education became an early casualty as politics interfered with academic appointments while good academics were hounded into exile.

The introduction of the 8-4-4 system of education perhaps lowered the education standards that Kenya had.

Corruption became institutionalised, as public funds were re-routed to private pockets through projects and contractors.

As the donors took a questioning position, finance to develop and maintain infrastructure became scarce, and roads became impassable.

At the end of the second presidency Kenya was a ghost of its former self.

Agriculture had shifted to subsistence farming and food imports became a new line of business.

Industries closed down and Industrial Area became a ghost town.

Businesses shifted to South Africa and Zimbabwe.

Kenyans for the first time resorted to importing anything second hand.

Massive brain drain to the West diminished skills to a low level. In summary the economy was in ICU.

By the time the third presidency under NARC government appeared on the scene in 2003, Kenya was pregnant with hope.

After nearly eight years, the third presidency has recreated a semblance of stability and recovery is gathering pace.

Probably the first surprise from the Kibaki presidency was in tax collection reform which freed Kenya from overdependence on donor funding.

The government embraced new capital and markets especially with China, and this has reduced bureaucracy and conditionalities associated with development aid, hastening infrastructural revival.

Visible successes have been registered in ICT, Roads, Airports, Energy, and Financial markets.

A key achievement has been in legal, regulatory and institutional reforms in nearly all sectors of the economy, as this has created an enabling environment for new investments.

Accountability and responsible governance in public service are gradually creeping back.

Pent up Kenyan enterprise

The economic recovery over the last eight years has opened up long pent up Kenyan enterprise which has now found its way into revived agriculture, commerce, construction, SMEs, as Diaspora capital flows back into Kenya.

The observations above shows that a country can easily and quickly lose all its gains, if proper leadership is not in place.

We therefore need to ensure that in 2012 we elect a leadership that will continue to inspire a new Kenyan Dream which will lead Kenyans to self-actualization in whatever fields they chose to excel.

The target leadership should also be capable of protecting the gains achieved through the new constitution.

Wachira is the Director Petroleum Focus Consultants; wachira@petroleumfocus.com