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Storms Kenya must navigate to keep economy on track

President Uhuru Kenyatta. FILE PHOTO | NMG
President Uhuru Kenyatta. FILE PHOTO | NMG 

Kenyans welcomed 2018 hoping for “annus mirabilis” (wonderful year) to make up for a 2017 “annus terribilis” (terrible year), as compared to say, 2008 as our “annus horribilis” (horrible year).

Yet nothing has changed. From one side, we are beseeched to “move on” with development and the “Big Four”. From the other, we are reminded that we cannot move forward without electoral justice.

This year smells of more “business unusual”. It’s already happening in ways we may not fully appreciate.

As we follow People’s Assemblies on late night TV, awaiting the swearing-in ceremony, the government has worked quietly to incorporate the “Big Four” into our national planning and budget framework, with the Treasury most recently building its Budget Policy Statement around this agenda.

A quick aside. It is fair to say that President Uhuru Kenyatta’s Cabinet and senior officials appointment process has offered the ultimate in “business unusual”.

In the first round on January 5, we had the early allocation of “wet (resource-rich) ministries” to six men. That was usual.

Then, in last Friday’s second round reportedly guided by “hand-written” notes, three things happened. One, that “new/old” position of Chief Administrative Secretary (CAS) formerly known as Assistant Minister. Rearguard action? Political capital for future wars?

Loyalty rewards? Likely all of the above. Note the preponderance of politicians on this new role.

Second, the institutionalisation of “lighter duties”. So those deemed not to have delivered on Mr Kenyatta’s domestic policy agenda now have the chance to execute his foreign policy agenda.

Europe, East Africa Community and India are the happy recipients of our latest (public) service exports.

Third, confirmation that loyalty trumps competence. Successful appointees from this nomination will enter office with a clear implementation (that is, “do, don’t think”) mandate — policy, programmes, plans and budgets are done.

“The time for talking is over”— remember who said that?

It is fruitless to debate individual names in this context. Better to reflect on if or how Mr Kenyatta applied the constitutional possibilities available to him to offer nominations that balance our great inequalities — gender, geography, inter-generational equity and ethnic, religious and social exclusion.

Or the constitutionality of that CAS position. Or maybe we should start with the “State Department” trickery from his first term that has created multiple-PS ministries with single-PS accounting officers?

Remember that millennial Moi moment when, following sustained donor pressure for “ministerial rationalisation”, we ended up with 28 ministers heading 15 ministries? The difference is the same.

But there’s more going on with “business unusual”. Let’s look at elections and our much-maligned Independent Electoral and Boundaries Commission (IEBC).

That both rounds of the 2017 presidential election were littered with a mix of error and chicanery is without doubt. Undeterred, IEBC recently issued two press notices.

The first concerned a Post Election Evaluation (PEE) of 2017 which will be ready for national debate by May this year.

The second announced was about our third (post-constitution) boundaries review in preparation for the 2022 election. By law, these reviews happen every eight to 12 years.

Given our last review in 2012, read completion any time between 2020 and 2024. With a national population census set for 2019, we are looking at work commencing this year towards a completed census and boundaries review by 2020 or early 2021 (to apply in the August 2022 election, the boundaries review must be ready before August 2021).

As we focus on TV clips, certain “electoral reforms” could happen before we can say “electoral justice”.

Welcome to the “business unusual” of “getting on with business” versus “engaging the public”. Which brings me back to the 2018 Budget Policy Statement (BPS).

NASA’s decision to “gerrymander” itself out of parliamentary business means that the 2018/19 national budget has effectively been passed, notwithstanding Jubilee’s “tyranny of numbers”. That’s as business unusual as it gets.

So, if we are proceeding on this path, what are some of the new things the BPS tells us?

To begin, the Treasury estimates that GDP growth fell from 5.8 per cent in 2016 to 4.8 per cent last year. Basically, our 2017 “sight and sounds” cost us a full percentage point in GDP growth. But there’s good news too.

The BPS cheekily notes that five-year average GDP growth at 5.5 per cent was higher than the Grand Coalition Government’s 2008-2012 4.7 per cent. Unacknowledged is that this was also higher than NARC’s 2003-2007 5.2 per cent growth average.

Unfortunately these are just numbers, not Kenyans’ lived experiences. Inclusive growth, anyone?

The job creation comparison between the Jubilee administration and the Grand Coalition comes out as 160,000 more jobs per year created by the former (817,000 vs 656,000).

The success story is extended to inflation, which averaged 6.7 per cent between 2013 and 2017, 10.6 per cent between 2008 and 2012 and 7.9 per cent between 2002 and 2007. Significant increases in forex reserves are also noted.

On the flip side, there is more caution around interest and exchange rates, while we ended 2017 remarkably with a balance of payments surplus, despite our large current account deficit, owing to highly encouraging performance on the financial account through FDI and other investments.

As expected, the BPS offers a brave face on fiscal performance, speaking to 2017/18 as a year of revenue “underperformance” and “elevated” expenditure pressures on account of drought, elections and salary awards.

The year-end prognosis is a larger primary deficit — by Sh86 billion — than originally budgeted. Think about a Sh61 billion shortfall in revenue and grants (Sh63 billion short in tax collections). Add a Sh58 billion overshoot in recurrent spending. Consider development expenditure under-absorption of Sh33 billion (including Sh45 billion in under-spent domestically-financed development expenditure).

Outside politics, this is the economic backdrop that informs the ambitious Big Four plan-inspired BPS. Space does not allow a detailed consideration of the initiatives envisaged, but here are some highlights in terms of targeted “results” for 2022.

On the manufacturing front, the intent is to increase the share of manufacturing in GDP by two thirds from about nine to 15 per cent, and create 400,000 manufacturing jobs while at it. In 2018, we’re talking roughly 90,000 new jobs in textiles, cotton and apparel, leather, agro-processing, fish processing and ICT.

One hundred per cent food and nutrition security (that is, all citizens) is the next 2022 target, to be achieved through large scale production, improved smallholder productivity and reduced cost of food.

Targets include a 70 per cent increase in maize availability, quadrupled rice and doubled potato availability.

Acreage under irrigated large scale production will double, the smallholder share in agriculture production and value addition will rise from 16 to 50 per cent, and the proportion of average household income spent on food will fall from 47 to 25 per cent.

One thousand SMEs focused on production for value addition are set to be in place by 2022, formed at the rate of 200 per year.

Current health coverage is estimated at 36 per cent of Kenyans. This will rise to 56 per cent in 2018, 71 per cent in 2019, 85 per cent in 2020 and 99 per cent in 2021. Universal health coverage (100 per cent) is to be achieved in 2022.

Let’s translate these percentages into numbers. In 2017, 16 out of 46 million Kenyans had a medical cover. By 2022, all 52 million Kenyans will have medical cover.

In addition, we will have 10 new referral hospitals, four comprehensive cancer centres and 21 additional MES-equipped hospitals. Expect a 50 per cent increase in health workers and a 50 per cent reduction in out-of-pocket medical expenses.

In addition to 500,000 affordable houses by 2022, the expectation is that 350,000 jobs will be created and the GDP share of real estate and construction will rise to 14 per cent (from 8.4 per cent in 2016).

This Big Four agenda will build on the previous (2013-2017) economic transformation agenda through continued investment in youth training, power cost reduction, infrastructure, governance and security. Kenya’s tragedy is that we can’t have a national conversation on this — beyond either “cheerleading” or “nay-saying” — to test it for socio-economic relevance, fiscal realism, implementation feasibility or pure common sense.

But it’s clear from a detailed reading of the rest of the BPS (strategic interventions, sector priorities, fiscal framework and programming) that the Big Four came rather late in the planning and budgeting cycle, and the Treasury has made creditable efforts to “mainstream” it into existing programmes.

Prior to the Cabinet appointments, it was apparent that planning was experiencing much difficulty in even mainstreaming the Big Four into the Third Medium-Term Plan, and not only were Planning and Treasury not talking, they weren’t even using the same programming framework.

The “merger” of Treasury and Planning may be a technical “silver lining” from Friday’s appointments, even though it leaves Devolution (now merged with ASALs) in a weaker position when it comes to a seat at the “resources table”.

This latter point may be significant since the Big Four — which covers devolved responsibilities — will continue alongside incomplete “mega-investment” from Mr Kenyatta’s first term.

Mostly, the stringent fiscal consolidation the BPS promises — almost impossible given our debt service outlook — will be hugely insufficient to support the Big Four without massive private sector investment, as Barclays Africa recently noted.

So depending on whom you ask, “things are happening, but they’re not”. Cabinet appointments versus swearing in and People’s Assemblies; Big Four, census and boundaries versus electoral and political justice.

It’s only January, but 2018 already looks like being Kenya’s “Novus Annus” (unusual year).

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