Japan scholars punch holes into Kenya economic growth model

Treasury secretary Henry Rotich expects the economy to remain resilient in 2016 and to grow by more than six per cent. PHOTO | FILE
Treasury secretary Henry Rotich expects the economy to remain resilient in 2016 and to grow by more than six per cent. PHOTO | FILE 

A team of Japanese scholars has punched holes into Kenya’s economic growth model, saying it concentrates wealth in the hands of the elite and widens the gap between the rich and the poor, making it unsustainable.

The 10 scholars drawn from some of Japan’s top economic think tanks and universities say in a newly-published book that the Kenyan economy as currently constituted does not promote inclusive growth and has failed to redistribute wealth to the poor with corresponding growth.

“Growth-leading sectors have not been broadly based in terms of poverty-reduction through employment creation. In short, way of growth is not inclusive,” says Kyoto University Graduate School of Asian and African Studies professor Takahashi Motoki, one of the lead authors of the book.

The book, titled ‘‘Contemporary African Economies: A Changing Continent under Globalisation,’’ blames Kenya’s rising inequality on restrictive economic policies that are far from being pro-poor.

“The government should invest in human resource development including health and education equitably. Such fundamental resource allocation should be regarded as basic entitlement of individuals and not favours that are influenced by electoral results or political consideration,” Prof Motoki says.

The book also paints a gloomy picture of Kenya’s economic prospects, with manufacturing, touted as the future engine of the economy, showing dire signs of recession while agriculture, the backbone of Kenya’s economy, in a state of stunted productivity.

“Manufacturing growth sector is becoming thinner than before, productivity in the agriculture sector is static, and this is a very big concern,” Prof Motoki says.

Nairobi-based economist David Ndii shares the Japanese scholars’ grim view of Kenya, urging the country’s economic planners to pursue pro-poor polices.

Dr Ndii faulted the Jubilee government’s ongoing mega infrastructure projects, arguing that while there is need to upgrade infrastructure, the focus should be on initiatives that boost the productivity of the poor. 

Pursuing initiatives that improve the fortunes of small holder farmers is one such intervention that will ensure inclusive growth, he said, arguing that no country can lock out two thirds of its population from the consumption market and claim that its economy is growing.

“Massive state projects like the standard gauge railway (SGR) only enhance efficiency and profits for the business elite and have no direct impact for the smallholder farmers whose main concern is access to markets, higher yields and incomes,” Dr Ndii said.

Joseph Kieyah, the Kenya Institute of Public Policy Research and Analysis (Kippra) chief principal policy analyst, however, dismissed claims of a disjointed economic model as lacking in facts.

He argued that whereas income distribution among Kenyan citizens could be unequal and skewed towards sections of the population, Kenya is “doing everything right”, for a young economy.

Prof Kieyah said key policy interventions such as the ongoing construction of the SGR and electricity generation projects would address the supply side constraints of the economy in the long term and bring down the cost of production, ultimately increasing incomes of ordinary Kenyans.

“To reduce poverty is to increase growth no matter where that growth is coming from. We are baking the cake now and making it bigger. We cannot start talking of subdivision before we grow enough,” said Prof Kieyah.

Former Central Bank Governor Njuguna Ndung’u said there is urgent need for a socio-economic re-organisation to ensure the benefits of growth trickle down to the poor.

“The current economic structure must change,” Prof Ndung’u said, citing lack of adequate access to markets for Kenyan farmers and weak governance systems at the county government level as obstacles to inclusive growth.

“We thought that when more resources are removed from the centre to the periphery, we should see this working but we clearly failed to establish structures that support devolution.”

The book’s assessment is at odds with the official government position, which indicates that more Kenyans have in recent years been lifted out of poverty in tandem with economic growth.

Official statistics show the Kenyan economy grew by 5.6 per cent last year compared to 5.3 per cent in 2014 on the back of strong expansion in agriculture and construction.

Increased activity in the agriculture, manufacturing and trade sectors powered Kenya’s labour market to a rebound that created 128,000 formal sector jobs, according to the Kenya National Bureau of Statistics.

Treasury secretary Henry Rotich expects the economy to remain resilient in 2016 and to grow by more than six per cent, riding on favourable weather, tourism sector recovery and growth of investment as the business environment improves.

President Uhuru Kenyatta has often voiced optimism in government initiatives to improve the quality of life for Kenyans.

His government has pledged to lift 10 million Kenyans out of poverty by 2017 through investment in sectors that create direct and indirect jobs, especially for the youth.

African Development Bank (AfDB) regional director Gabriel Negatu described “the book as offering a comprehensive view to approaching Africa’s development”.

He said part of that bigger picture is fostering inclusive economic growth, which is one of the twin objectives of AfDB’s Ten-Year (2013-2022) strategy.

The publication was recently translated into English with the support of AfDB having been researched and published in Japanese.

The book’s authors include Kitagawa Katsuhiko (Professor, Faculty of Economics, Kansai University), Takeuchi Shinichi (Director-General, Area Studies Centre Institute Developing Economies), and Fukunishi Takahiro (Director, African Studies Group).

Others are Nishiura Akio (Professor, School for Excellence in Educational Development, Soka University), Sugimoto Kimiko (Hirao School of Management, Konan University), Masaki Toyomu (Professor, Faculty of Economics and Management, Institute of Institute of Human and Social Science, Kanazawa University).