- The new proposals to introduce tax holidays for start-ups, relief on payment of university student loans and introduction of business incubation centres are not radical in any way.
- But they reflect significant and good intentions.
- So are the proposals around introduction of a prompt payments law. Indeed, business cannot thrive in an economy where invoices are not paid on time.
In terms of the economy, Kenya is ready to fly. But we must first graduate from the bad politics that forces us to permanently run unsustainably large budget deficits that are funded by massive external borrowing.
We are going into the BBI process with very shaky government finances. Revenue shortfalls have persisted. The cost of government borrowing has hit the roof. Only constitutional reform can move the economy from the logic of ‘it is our turn to eat’. How far has the BBI report fared? To its credit, the BBI has proposed a raft of measures to strengthen and grant anti-corruption institutions enhanced powers and independence.
But whether the proposal can move the needle in the fight against corruption in any substantial way remains doubtful. It is only in Kenya where you can introduce new anti-corruption laws, establish overlapping anti- corruption institutions, have a whole procurement oversight regime introduce an assets disclosure system requiring all public servants to declare their wealth, and still end up with more corruption.
The new proposals to introduce tax holidays for start-ups, relief on payment of university student loans and introduction of business incubation centres are not radical in any way. But they reflect significant and good intentions.
So are the proposals around introduction of a prompt payments law. Indeed, business cannot thrive in an economy where invoices are not paid on time.
With the march of technology towards automated payment systems such as the real-time gross settlement system, the government’s G-pay system operated by the Central Bank of Kenya, and the introduction of cheque-capping, limiting cheques to Sh1 million, it is surprising indeed that suppliers still have to wait for long periods to be paid.
Well-meaning programmes such as the much-touted “access to government procurement opportunities” that allows 30 percent of contracts to be given to the youth, women, and persons with disabilities have not achieved much because invoices are not paid promptly.
Yet I still feel that the BBI report has given scant attention to the big economic issues of the day. I don’t get the sense that the people behind this initiative have given serious thought to where we are right now, where we are likely to be in the medium term and what must be done to put the country on the economic growth path it was in the early years of Mwai Kibaki.
The political elite still act as if our exchequer is an inexhaustible source of money. Is it not the height of irony that somebody can still suggest that we should increase the number of MPs and senators? That on top of the Constituency Development Fund, we should create a new ward area fund?
In the last 10 years, Parliament has evolved into a massive monolith, gobbling billions of shillings in taxpayer money at a time when revenue bases are shrinking. Yet the BBI report still proposes to increase elected MPs by 38 to 454 members, with some 70 members being picked from political party lists based on performance in elections. Why aren’t we concerned about the size of the public sector and the pressure it is placing on the taxpayer.
More MPs and senators will be accompanied by obscenely high salaries, untaxed car benefits, excessive mileage allowances and more expensively furnished offices. Have you looked at the multi-billion shilling high-rise building that Parliament is constructing for offices of senators and MPs? Where is value for money in all this?
This economy cannot recover meaningfully if we continue spending a disproportionate share of revenues on expanding the waistlines of MPs and senators. In the last 10 years, the budget of Parliament has been growing faster than the budgets of roads and health. Today, the parking lot of Parliament is full of expensive fuel-guzzlers that are all funded by the taxpayer.
In future, we will pay heavily for refusing to restructure our economy from consumption- and for not focusing on expenditure that supports actual production of goods and services.