Re-engineer development using a Vision 2040 covering national, county priorities

Browsing through the Economic Survey 2016, one sees an economy with most of the key sectors marginally growing and with a macroeconomic environment that is mostly stable.

The monetary policies have evidently stabilised the exchange rate and inflation, while runaway interest rates are on the mend.

Informal sector jobs are growing while the social indicators (education and health) are positive. However at 5.6 per cent growth rate in 2015 the economy is still far from reaching the peak of its potential.

The positive impact of low global oil prices on the economy over the past two years is quite evident with an improved balance of payment, reduced inflation and, of course, low energy cost inputs.

Petroleum consumption rose by about 20 per cent from 3.9 million tonnes in 2014 to 4.7 million tonnes in 2015. The oil import bill dropped by 26 per cent from Sh309 billion in 2014 to Sh229 billion in 2015.

Was it an ‘opportunistic’ economic growth assisted mainly by low oil prices? If the answer is in the affirmative we need to focus on ways to drive sustainable ‘real’ growth even when oil prices revert to high levels, as they will do.

In respect of electricity, demand grew by an impressive 9.7 per cent while installed generation capacity increased from 1,723 megawatts (MW) in 2013 to 2,263 MW in 2015.

This is an indication that the “stretched” target of 5,000MW by 2017 has challenged the energy gurus to keep supply ahead of demand.

This way there is sufficient buffer for electricity supply to ensure that no socio-economic development shall ever stall or delay waiting for power. The latent electricity demand that energy economists talked about is gradually surfacing as supply and distribution expand.

At 6.2 per cent growth in 2015, agriculture was one of the good performers with increased produce and values. However this was mostly due to good rains, high international prices and low energy cost inputs, items not within our influence.

Agriculture being Kenya’s “core” economic sector should be growing in double-digit figures if we are to meet our national GDP growth targets. It is the sector with the highest capacity and potential to achieve long term national prosperity.

However to walk the talk, the national and county governments will need to routinely allocate sufficient budgets for agriculture. Produce marketing systems should be expanded and made efficient to motivate farmers and herders.

Manufacturing performed lowly at 3.5 per cent in 2015, and this is despite low cost of energy inputs. This is another productive sector with huge transformational potential to the economy.

We have observed ongoing activity to set up basic capacity and institutions for small and large-scale industrialisation which is the logical starting point.

There is also evidence that manufacturing is now focusing on bottom-up value addition of the other productive sectors like agriculture , livestock, forestry, and minerals.

The fertiliser factory coming up at Eldoret is a major score for manufacturing and agriculture as it capitalises on a captive fertiliser demand while substituting imports.

The ongoing efforts to create capacity for leather product industries are acknowledged. The Baringo County work on an abattoir for donkey meat exports is an ingenious value-adding project for herders.

However, caution is advised on the revival of the Webuye-based Pan Paper Mills, which may not be environmentally or economically sustainable unless alternative feedstock is developed.

A good sustainable alternative feedstock is the fast-maturing bamboo which will certainly do well in Western Kenya with out-growers creating more jobs.

Construction and building sectors registered the most significant growths (13.6 per cent) with the single largest infrastructure project SGR making a huge contribution.

However, it is in the buildings (mostly private) that we need to ask some genuine questions. Are we diverting most of the capital and credit from the productive sectors (manufacturing and agriculture) into buildings which many consider safe long term investments?

There is talk of industrialists closing down their factories in Industrial Area to invest in real estate and malls, an indication that something has gone wrong in manufacturing. The same stories will be told of giving priority to buildings over agriculture.

Targeted planning

Finally, whereas The Economic Survey’s focus on historical actual economic performance, we need to turn our attention to more organised and targeted economic planning for the future.

Many argue that the Vision 2030 is more or less out of date with fewer and fewer policy implementers using it as a reference document.

Of late it has been projects and programmes based more on election manifestos, and this may miss essential national development targets and socio-economic synergies.

We should be drafting a new Vision 2040 which focuses on emergent development priorities and which takes into account the dual national/county planning.

Such a plan should be ‘ring-fenced’ from frequent political changes and should advise election manifestos.

Mr Wachira works with Petroleum Focus Consultants. Email: [email protected]