Editorials

Invest in real economy to bridge the inequality gap

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Three Nigerians suspected to enjoy the backing of a powerful Kenyan politician and two Kenyans wired Sh25.6 billion between October and November 2020. FILE PHOTO | NMG

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Summary

  • The widening gap between Kenya’s wealthy few and the rest of the population should concern everyone, more so the policy makers.
  • The rising inequality, which has seen the two wealthiest Kenyans boast a higher net worth than the bottom 16.5 million of their fellow citizens, points to a deeper lying problem that will not be addressed solely by taxing these individuals heavily.

The widening gap between Kenya’s wealthy few and the rest of the population should concern everyone, more so the policy makers.

The rising inequality, which has seen the two wealthiest Kenyans boast a higher net worth than the bottom 16.5 million of their fellow citizens, points to a deeper lying problem that will not be addressed solely by taxing these individuals heavily.

To begin with, the country must improve how it invests taxpayer shillings in the real economy.

Sinking billions of shillings in infrastructure improvement by itself will not yield the desired improvement in income that is necessary to close the yawning gap in fortunes between the haves and have nots.

The infrastructure outlay should instead be accompanied by robust investment in supporting small businesses, social protection, affordable healthcare and education. This means introducing the necessary policies and laws to drive investment in the real economy.

Of these interventions, fair access to quality education for all is likely give Kenyans equal opportunity to climb the income ladder. Not only does it open up opportunities that would otherwise only be accessible to the moneyed few, a more educated population is less likely to be manipulated by the wealthy.

The lack of social protection is also contributing to the inequality, particularly the high cost of healthcare and a lack of pension cover for the aged.

Kenyans in the top one percent bracket by net worth, who by normal standards would be expected to enjoy a comfortable lifestyle, are also more vulnerable to economic shocks compared to their peers in other, less unequal countries.

One of the lessons learnt during the Covid-19 pandemic is that many families that are ordinarily passed off as being in the middle class are actually just one large hospital bill away or a missed pay cheque from financial ruin.

The situation is even more dire for those at lower income scales, whose resources are wholly swallowed up by day to day survival expenses.

They will struggle to lift themselves out of the poverty trap, unless they get fair, affordable access to education and other social services.