Subsidy fumble is failed energy policy

Let’s imagine, for a moment, how Kenya could be if we saw the same level of strategic positioning and energy applied to our economic wellbeing as gets applied to our five-yearly elections. For imagine any politician just riding along paying out, without a plan on how to win.

Yet, that’s what we get as energy policy. World fuel prices start rising. For months on end, commentators say they are going to rise a lot more. So, let’s say you have to come up with a way to limit the damage of that for Kenyans.

You could make a lot of noise, warning Kenyans oil prices are rising and rising, and to look at all ways to shift energy source from petrol and diesel.

You could discuss with oil marketers offering alternative biofuels, or accelerate the introduction of electric vehicles — with so much of our electricity now coming from renewable sources. You could offer subsidies on solar equipment and wind installations. And onwards. Try the project.

Or you could wait for the price rises to roll in, offer oil marketers subsidies, and spend Sh13 billion stalling their impact, only to need to approve Sh34 billion nearly immediately for more subsidies, because, in your view, that’s the very best way to spend Kenya’s scarce public funds.

So that’s five minutes’ thinking, or six? And how failed: for public funds are short and government payments extremely in arrears, and holding off oil price rises benefits no one if the subsidies don’t go through. Because it’s a small fact of the Kenyan informal sector that pricing isn’t logical or demand-driven.

Where a price is rumoured or discovered as possible, it cannot then be relinquished, under any circumstances, even if people starve holding out for this ‘mini-wealth’.

So this is how Kenya’s own wealth-economics work: a boda boda rider suddenly faces an extreme petrol shortage, and may have to buy petrol second-hand at grossly inflated prices. Plus, others have no petrol at all. So he puts up his Sh50 boda boda fare to Sh200. The bus from Nairobi to Coast does the same, its Sh1,500 fare goes to Sh5,000.

Now, then, the government releases a subsidy back payment, a bit of petrol starts to come through: will that boda boda rider move his price back to Sh50? No, because he got people to pay Sh200. And he liked that, and his friends know he managed to get that too. Now asking fares are Sh200, and city-to-city fares are Sh5,000.

So, from our five-and-a-half-minute fuel strategy we have the subsidies to oil marketers and the expensive fuel and travel for wananchi, and no respite in view on this new mega soak-away on our precious public funds.

And that’s what happens when a strategy isn’t a strategy at all, but a ‘grabbed-at’ tactic.

A strategy thinks through scenarios: OK, if we’re going to pay from the government purse when oil prices rise, what other spending are we going to cancel? What will it cost at a maximum? Can we afford it? What will happen if we can’t manage the subsidy payments on cash flow?

But our fuel ‘stabilisation fund’ and all those years of setting the fuel price were never a ‘strategy’ to deal with our dependence and vulnerability to fluctuating oil prices.

They are just a ‘stop-gap’, Sh34 billion for a few months of price rises delayed until we have no more ‘spare’ Sh34 billion.

Yet, strategy is possible. An electric bicycle costs from Sh40,000 and goes at speeds up to 45km per hour. For Sh34 billion, we could have 85,000 of them and a permanent solution on, at least, the boda boda petrol crunch. Likewise, subsidy costs for the six months after that could pay for biofuel infrastructure for trucks.

The Chevrolet Colorado, Ford Transit Cargo Van, GMC Terrian, Jaguar, RangeRover, all have trucks that can run on vegetable biofuels —though, to any strategist, food production costs are soaring, better to switch to electric.

Electric articulated lorries: Volvo, DAF, MAN, Freightliner, Tesla. Did we analyse petrol use? Did we strategise to replace it? And is that what got us to: let’s subsidise petrol, fail to pay on time, spend billions, and get Sh5,000 city-to-city fares?