How counties can bounce back economically

Kenya and the rest of the world are facing the greatest health pandemic in more than 100 years. This has and will affect the world’s economy projected to be going to depression and result in unprecedented unemployment and loss of wealth never before seen.

We have seen stocks wiped off from the markets at the security exchanges. While wealthier nation’s continue to battle the disease, they are already cushioning their people, putting in place plans and measures to mitigate the negative effects of the pandemic. That luxury is not available to middle income and poor countries.

The scale of the disease is not yet known in Kenya even as research continues and test levels still low. But on the initial assessment, it will be devastating. Mid last week, President Uhuru Kenyatta outlined measures to cushion and jump-start the otherwise dead commerce and trade activities. Among them the reduction of taxes that is aimed to boost production and allow more disposable income, but even before corona, the country was already limping.

There was already liquidity challenges, cash-starved small and medium enterprise (SME) sector, low payment of pending bills and the huge debt hanging over our heads.

The pandemic couldn’t have come at a worse time. While the economy is operating on the half engine, some of these measures cannot work before we are out of this health crisis. We can’t simply boost a business that has been classified as a non-essential and isn’t operating. But even as that goes on, economists make predictions that help in planning, which never ends.

Our counties too should see how they can jump-start their local economies with early planning and strategic measures. Why? Because most of the devolved functions — agriculture, health, trade and licensing, sports and water — are the closest to the common folks and are low-hanging fruits.

How then can the counties plan? How should my county Kisumu respond? First, it is no longer a secret how this dip will last and getting out my take a year or two, putting in place realistic revenue targets and incentives at this Budget formulation stage for the next Financial year is key. The Budget Estimates should have a realistic accompaniment in the Finance Bill. That cognisant of the current economic conditions in the country, the collected revenue from trade and licences may drop because of the collapsed businesses and need to give them incentives to start, like the hospitality sector.

A clear strategy on markets and spaces of small-scale trade is key. Counties should start implementing the tax holiday for new businesses and youth-owned businesses to encourage trade and commerce. The barrier to entrance needs to clear.

So, licences will either be waived or costs halved. Counties will bounce differently, some slowly and others fast. We must strive to be first and take advantage of the regional markets.

Second, this will also go hand in hand with an allocation for trade and enterprise — development in counties. At our levels, counties have a unique ability to identify grassroots businesses that got a hit and need a boost to expand. These can be identified and offered loans for expansion. It would mean expanding the trade fund pool to a reasonable and impactful figure.

Third, pending bills have always been an issue. Even as the Treasury stresses on the importance of it, huge debts still weigh on SMEs that offer services to counties. As the first charge to our budget next financial year, and to increase liquidity and cash flow in the hands of the business community, all outstanding pending bills at the closure of this financial year should be budgeted for as the first item of payment in the next fiscal year’s budget

Fourth, agriculture remains a low hanging fruit. Even as the crisis persists, farmers continue to till and plant being the onset of a rainy season.

As the demand for goods falls with this crisis, and disposable income disappears, when no one cannot afford non-essential items, food remains a basic item.

Counties can they pick up the role of looking for markets and adding inputs for an aggressive agricultural kick-start, which shall open doors for other industries in the value chain.

Lastly, counties need to identify sectors that they have a competitive advantage on and leverage them. A sector that a full value chain can absorb thousands of youth. Something akin to what Makueni has done with mangoes and Kisii is doing with avocado and banana.

All these planning can only be achieved when healthy, so as we plan to bounce back, because we will, let’s wash hands and practise social distancing.

George Abwajo, Member, Kisumu County Budget and Economic Forum