Daniel arap Moi had mixed economic legacy

When Daniel arap Moi took over the presidency in 1978, the task of steadying the Kenyan economy was firmly rested on his shoulders.

There was much work to do for president Moi, who passed away in Nairobi on Tuesday, because he had inherited an economy that was experiencing the side effects of the double oil shocks of 1973 and 1979, coupled with gross mismanagement of the coffee boom between 1976 and 1977. These drawbacks dealt a blow to the average economic growth rate of about six percent that the country had registered within its first decade of independence under Moi’s predecessor, Mzee Jomo Kenyatta.

The task was therefore well cut-out for Moi to steady the ship and place the economy back on the right trajectory. All did not, however, go well for his administration.

In a case study on Kenya’s growth performance, two economics scholars, Francis M. Mwega and Njuguna Ndung’u pointed out that “the economy never fully recovered from these shocks and the redistributive policies of the Moi era, with each recovery from an exogenous shock weaker than the preceding one. This is despite the implementation of substantial donor-driven reforms in the 1980s and 1990s, covering nearly all sectors of the economy”.

Kenya's poor economic run was aggravated by a number of exogenous shocks in the early 1980s, which included the 1982 attempted coup by Kenya Air Force soldiers and a severe drought in 1983-84. The country also experienced another biting drought in 1991/1992 followed by the extremely destructive El-Nino rains in 1997/1998 and a major drought that led to power rationing in 2000.

The economy also had to deal with the shocks of sharp rises in oil prices due to the 1991 Gulf War, the aid embargoes of 1991-93 and 1997-2000. The challenges saw inflation hit a historic high of 46 percent in 1993 while the average lending rate was 30 percent, the highest in Kenya's history. The country suffered further economic knocks following the deadly tribal clashes that coincided with the 1992 and 1997 General Elections.

“President Moi’s lag in ranking has a lot to do with great turbulence that included Structural Adjustment Programmes (SAPs), aid freeze, the uncertainties of end of cold war, economic and political liberalisation and finally and sadly through tribal clashes that led to capital flight, internal displacements and slowdown in economic growth,” an economic analyst, XN Iraki, says in a performance review of Kenya’s presidents since independence.

The situation was also compounded by divergent policies between the Kenyatta and Moi administrations. Mzee Kenyatta represented allied groups whose interest was to further a market-based economy that had benefited them as cash-crop exporters. His constituency also had a headstart in human capital, and this helped to justify that he was not using the State as a redistributive mechanism but as a mechanism for facilitating private capital accumulation by already relatively well-placed indigenous Kenyans. Kenyatta's politics ended up favouring a relatively market-friendly, growth-promoting regime.

Moi on the other hand represented groups that felt “disadvantaged” under the Kenyatta regime and that sought to redistribute resources themselves.

“The reversal of 'trickle down' meant greater State intervention in the economy, with subsequent efficiency costs associated with the taxation of productive activity,” Mwega and Ndung’u observed. “It also meant the dismantling of various agencies of restraint with concomitant costs in terms of macroeconomic stability”.

These policy shifts centred on redistribution, coupled with climate shocks in 1984 and political upheavals in the 1990s that saw economic growth decline under the Moi administration.

Official data shows that in the 1980s and 1990s, the country registered persistently low growth and limited economic transformation. This despite the fact that the country was at the time largely enjoying political stability while it adhered to its development strategies as spelt out in its economic framework.

From 6.9 percent economic growth in 1978 when he took over from Mzee Kenyatta, growth had slowed down to 0.6 percent when he handed over power to his successor, Mwai Kibaki, in December 2002.

A total of 13 banks were put under liquidation between May 1993 and August 2001, locking up billions in customer deposits — and adding to the economic mess that had become of the country.

Analysts paint a picture of Kenya’s missed economic opportunities in the 1980s and 1990s — failing to cash in on an expanding manufacturing export market amid a persistent falling share of manufactured exports in manufacturing output. This despite its coastal location, relatively cheap labour and market-friendly orientation.

“While the country opened its economy in the 1980s and 1990s, the trade liberalisation policies were not credible and were often subject to reversals. Manufactured exports were also subject to serious supply constraints such as the unavailability and/or high cost of credit, infrastructural deficiencies and an adverse regulatory framework, increasing transaction costs and undermining the country’s competitiveness” Mwega and Ndung’u further said.

Despite the downsides, Moi’s administration is credited with deepening investment in the education sector, especially higher education. Notwithstanding the economic challenges that faced him from the onset, Moi’s resolve to improve higher education in Kenya remained steady. This saw the creation of the Ministry of Higher Education in 1978 followed by a directive by the University of Nairobi to expand enrolment and innovate its programmes.