Ideas & Debate

Big Four and medium term plan: Kenya's unknown unknowns

Budget: Treasury Cabinet Secretary Henry Rotich
National Treasury Cabinet Secretary Henry Rotich poses for a photo outside The National Treasury Building ahead of the 2018/19 budget presentation at Parliament on June 14, 2018. PHOTO | DIANA NGILA | NMG 

It was former US Defence Secretary Donald Rumsfeld who famously stated “there are known knowns; there are things we know we know. There are also known unknowns; that is to say there are some things we do not know. But there are also unknown unknowns – the one’s we don’t know we don’t know”. There are also unknown knowns; that is things we don’t know that we know.

In between the “Handshake”, the “Big Four” Plan, and everything else happening nowadays, Kenya fits nicely into all of these categories. In risk management terms, think “knowns” and “unknowns” in terms of a matrix of “likelihoods” (we know it will happen) and “impacts” (we don’t know how it affects us).

Our permanent “known known” is our interminable politics; we know it will never end, and we know (from history and knowledge) the risks it poses to our socio-economy. We know that this politics will affect the success of the handshake or the Big Four, but not how badly (“unknown known”).

Our “known unknown” is that our immediate future might depend on the timing of support we get from the IMF. That everything in economic Kenya could go “belly up” is our big “unknown unknown”.

While some might argue that the lack of publication of the 2018-2022 National Medium-Term Plan (MTP), or indeed the “Big 4 Plan”, is a matter for bureaucrats, it continues our recent unhappy path away from the logic of policy, planning and programmes towards budgets, procurement and “tenderpreneurship”.

Today we have a national budget without a national plan; an illegality in law. Although I have heard that a Big 4-aligned MTP is in its final “panel-beating” stages, here are a couple of thoughts from a reverse reading of the budget.

Let’s begin with a look at the 2018/19 national budget in a Big 4 context. If we start with and treat tax collections (total expected Sh 1.75 trillion) as Sh100, this is how a revenue-driven budget would read.

Adding Sh14 for appropriations-in-aid (local revenues) and foreign grants gives us Sh114 to spend (before borrowing). Consolidated fund services (debt and other constitutionally-mandated costs) take up Sh29, leaving us with Sh85 to spend.

Then it gets interesting. Big 4 directly takes up Sh4. Infrastructure (rail, roads, ports, energy, water and ICT) will consume Sh20, and education another Sh11. Other “enablers” will use up a further Sh8 for internal security (excluding army and intelligence) and social protection for vulnerable groups.

That’s a total of Sh39 to “enable” Sh4 of Big 4.

Throw in a total allocation to counties of Sh17, for everything they plan to do. That takes us to Sh60, which added to the earlier CFS allocation, makes Sh89 (or Sh1.6 trillion) out of Sh114 (Sh1.99 trillion).

Then recall a fully financed budget deficit of Sh32. Added to Sh25 remaining from known resources (114 minus 89), we effectively have Sh57 in “other expenditure”, or basically Sh1 trillion for “other important stuff that government does” (triple our infrastructure spend). Don’t forget Sh4 for the Big 4.

Let’s give Treasury officials the benefit of the doubt and call this the “fuzzy math” question. In this picture, total tax collections (without other revenues and grants) are Sh100 against total spend of Sh146.

Second, in Treasury’s popular budget document, special Big 4 manufacturing attention will be paid to textiles and apparels, leather products, agro-processing and manufacturing of construction materials. Yet key allocations speak to a leather industrial park, a textile development EPZ hub and the modernisation of RIVATEX and New KCC, all at a cost of Sh2.5 billion.

Equally, while the Big 4’s 100 per cent food and national security strategy speaks to enhanced large-scale crop production and smallholder farmer productivity and the reduced cost of food, key allocations target ongoing irrigation projects, fertiliser subsidies, crop insurance and land titles and digitisation.

On 100 per cent universal health care, key allocations include stuff like leasing medical equipment for almost Sh10 billion, plus another Sh7 billion for CT scanners. Finally, housing. Think Sh1 billion for affordable housing, Sh2 billion for social housing, Sh1.5 billion for police and prisons staff housing and a similar amount for the civil servant housing scheme. Basically, the money doesn’t speak to the ideas.

Finally, have counties catered for the Big Four, since it basically represents functions within their normal mandates? Then, aside from the question of whether or not the Big Four is reality, did the 2018/19 National Budget also “crowd out” counties from the Big Four, in terms of both ideas and numbers?

These may well be our “unknown unknowns”.