Ideas & Debate

Top economic agenda for incoming leaders

The incoming leaders ought to identify key economic sectors and make them shine. FILE PHOTO | NMG
The incoming leaders ought to identify key economic sectors and make them shine. FILE PHOTO | NMG 

With elections complete (almost), it is time to focus on how the next five years can be fully leveraged towards making concrete socio-economic gains in the three main sectors of Kenya’s economy.

The first economic sector is agriculture, which constitutes 35 per cent of the GDP and 61 per cent of total employment. One problem with this sector is that on the one hand the export-oriented segment is very productive and profitable, yet domestic food security is still a major concern.

Tea was the largest export earner for the country in 2016 alongside coffee and horticulture, yet domestic food consumption is constrained by subpar production whose example is the maize crisis that was exacerbated by a severe drought.

The next administration should focus on several issues: first is increasing allocations to the sector from the current 1.8 per cent of the budget to, at a minimum, the African average of 4.5 percent.

Secondly, effort must be made to address the challenges in sector co-ordination between national and county governments; clear roles and responsibilities must be delineated for each level of government.

Finally, there ought to be a focus on active learning from productive agriculture sectors and lessons shared with the less productive with a focus on smallholder farmers.

The second sector is manufacturing which is a mere 9.2 per cent of GDP — the share of manufacturing in GDP has actually declined over the last five years and the sector formally employs only 300,000 people.

It can play a central role in driving economic transformation and job creation as there is a window of opportunity to capitalise on positive underlying factors in the global economy, including rising wages in Asia, the rebalancing underway in China and expand Kenya’s capabilities and presence in export-oriented, labour-intensive manufacturing within the next 20 to 30 years.

The incoming administration ought to make sure that the country’s manufacturing strategy as articulated in the Kenya Industrial Transformation Programme is given priority in the implementation of the third Medium Term Plan of Vision 2030 due to start in 2018.

The third sector is services, which is currently driving Kenya’s economic growth, constituting about 55-60 per cent of GDP. Leading sub-sectors include food and accommodation, ICT, real estate and, transport and storage.

However, the key service sub-sectors that require more attention are education and healthcare. Interventions in health should focus on better fiscal support to the sector.

In fiscal year 2017/18 donor funding of development expenditure in healthcare is estimated to be up to 63 per cent; such dependence is concerning.

There should be an emphasis on building the capacity of county governments, especially in terms of technical and administrative talent to better meet the health needs of their constituents.

In education the focus should be on better aligning curricula and training to better meet labour market needs as well as reorient the country’s economic structure to one in which manufacturing plays a larger role.

Finally, county governments ought to be supported in better equipping and expanding the reach of Technical and Vocational Educational Training Institutions (TVETs) and link students to practical county apprenticeships.