The quest for an inclusive society must continue

As the curtain falls on 2014, our thoughts are filled with both sweet and not so sweet memories. Individuals, communities and nations, have experienced mirth and grief, hope and despair, triumph and tribulation. Some of these experiences will be etched forever, in our hearts and minds; the stuff from which legend, myth, superstition, wisdom and history is crafted.

Evidently, breathtaking transformation is underway in our families and communities, in our nation and in our region, in our continent and in our world. The youth bulge, rapid urbanisation, economic growth and declining per capita productivity in the smallholder farm, have precipitated monumental transformation, especially in our country and in the East African region. These changes are perhaps inevitable but they are unprecedented. Of much grave concern is how these transformations will affect the socioeconomic and political equilibrium in our country and region.

For the first time, the most dominant group – socially and politically – is not poor uneducated rural farmers. It is the youth. They are young, creative and aspirational. Relative to their parents, they are better educated. However, unlike their parents, they are coming of age when rapid economic growth is characterised by fewer opportunities for decent work. For example, about 1 million young men and women enter Kenya’s labor market annually. But the economy generates less than 60,000 jobs in the formal sector.

Millions of Kenyans of school going age are out of school. Moreover, majority of our children are trapped in failing public schools and besieged by an education system crafted in logic of the industrial age. More than 40 percent of the children who finish standard eight do not have functional numeracy and literacy skills. Over 50 percent of graduates from our universities are not fit for work. Most young people agree on one thing; our education does very little to prepare the youth for the world outside school.

The differential learning outcomes between rural and urban schools and poor and not so poor children magnifies social and economic inequality in our societies. It curtails, severely, the potential to spread more evenly the fruits of economic prosperity. Lack of equity and social inclusion in education derails the capacity of education to balance the forces of economic growth, enable fair competition and equal opportunity and reduce inequality.

The youth, enchanted by the charm of the city, leave their rural villages in the hope of a better life. Without skills, and the right social networks they are confronted with unemployment, poverty and squalor. They become part of sad characteristic of Africa’s urbanism; where young dreams come to perish. Because, Africa’s urban space is where the rate of return on capital truly exceeds the rate of growth of output and income. It is orders of magnitude harder for the descendants of rural peasantry to get a toehold on the economic ladder in the city.

Hence, a fundamental transformation of the rural economy is an essential first step toward achieving equitable and inclusive economic growth. Smallholder rural agriculture, especially per capita productivity and profitability must increase. Smallholder farming must rise beyond subsistence production. The millions of smallholder farm families must become the fountain of agro-based industries, driving value addition. Rural agriculture must create the space for women to lead small and medium cottage industries. This will in turn, leverage the capacity of youth to innovate with ICT and develop appropriate solutions to connect and integrate agricultural value chains. 

The kind of capitalist growth we see in Africa today inevitably generates unsustainable inequalities that corrode the foundations upon which a just and inclusive society is built. Discourse about the mechanisms that generate inequality and social exclusion is at the heart of the political economy. Enlightened politics and progressive social policy can reign in inequitable accumulation and distribution of wealth, harness Africa’s demographic dividend, leverage the surge of urbanisation,. resuscitate moribund rural economies and make the promise of education real for all of Africa’s children.

As a public intellectual, with the privilege of studying, thinking and reflecting, I grapple with urgent and pressing issues of our time. I am mindful that that my efforts are both imperfect and incomplete. Such incompleteness and imperfection provides the essential scaffolding for continuing in 2015, the urgent and collective task of building a just and inclusive society. I am eternally grateful for your readership in 2014. I wish you much happiness in 2015

kenya needs a robust debate on devolution of education

For over fifty years, our education systems has been embedded in the political economy of a hegemonic state. Today access to quality education, outcomes of human, cultural, social and economic capital mirror the patterns of political patronage and the ethnic zero sum game of competition for and distribution of the so-called national cake.

Access to educational resources explains more than ninety percent of difference in economic and wellbeing outcomes among Kenya’s ethnic groups. Take a moment and think about the geographic distribution of the so-called national schools? My definition of national schools does not include the under-resourced former district and provincial schools that were recently assigned national school status.

The Kenyan state, through successive regimes since independence, has failed to allocate in an inclusive manner the critical educational resources that would enable equitable social mobility. Just like roads, water, electricity and health services, vested political interest by powerful Nairobi elites has always determined who enrolls, whether they complete and how much our children learn in school.

We must now re-think the role of the national government in education. The role of the distant state authority needs to be re-examined in the context of devolution. Moreover, we must be especially mindful of the track record of the national government with respect to equitable distribution and social inclusion in provision of vital social services over the last 51 years.

What we have seen in the past 50 years in the education sector is an inordinate burden of bureaucracy, politicisation and capture by special interest, inefficiency, and the hubris of one size-fit-all, which has led to unconscionable inequality in educational outcomes. Counties like Turkana, Marsabit, Tana River, Kwale and Mombasa have the scars to prove that this model does not work.

Devolution education is a plausible remedy. Fundamentally, education is about building relevant human capital, which is then deployed to drive cultural and economic capital for development. Counties are in the best position to articulate the fit between education and urgent local needs. By re-defining accountability we can prevent capture of the delivery of education by vested political interests. Moreover, decentralising education could make it difficult for schools to “game” the system when performance and accountability standards are not set at the national level and include critical parameters like social inclusion and local human capital formation.

Decentralising education does not take away the role of the national government. In fact, it makes the role of government much clearer. The national government would be responsible for defining the national curriculum framework. This would include core curriculum themes, which focus on values, ethics and civic responsibility. The national government would be responsible for defining exit competencies at all levels of the education system. This is consistent with the role of the national government in education, as stipulated in the fourth schedule of the constitution.

Essentially, devolving education is about increasing the role of local stakeholders and moving away from the hierarchical input-oriented governance to an outcome-oriented approach where the central government steers from a distance. Devolving education is not undermining the power of the state. It is about strengthening local accountability in the provision of national public goods. It is about making social inclusion and local capital formation critical to accountability in educational outcomes.

In a decentralised education regime, the government would the responsible for determining standards for teacher education, including a national certification program for both primary and secondary school teachers. This would also include setting very high academic standards for getting into the teaching profession. Teaching can no longer be the profession of the not so bright amongst us.

In a decentralised education regime, the government would be obligated to set up an education equalisation fund to improve school infrastructure. This allocation would be based on long-term weighted average mean scores (from 1963) in all national standardised tests. Counties with the lowest scores would be assigned the highest budget. Local stakeholders, including parents and students would have to determine how the resources are allocated.

Perhaps our greatest achievement in 50 years is the 2010 constitution, which vests sovereign power in the people of Kenya. It is we the people, who delegate authority to the legislature, the executive at national and county levels, and to the judiciary. What level of government should carry the greatest responsibility for preparing our youth for the future? Time for debate is now.

Africa must make inclusive growth happen

Blind exuberance and naïve optimism has trumped honest commentary on Africa’s growth and boom story. Do not get me wrong. Africa is on the ascent, economically. The ranks of the urban consumer middle class is growing. There is money to be made in Africa.

For a majority of Africans, the Africa rising narrative is hollow. Africa’s growth is intangible for over half a billion men and women trapped in moribund rural economies. For nearly 70 percent of Africa’s youth who lack skills Africa’s growth is intangible. For the hundreds of millions of women who eke out a living in unproductive agricultural fields and whose small-scale business are starved of credit, Africa rising is empty words.

Zedekiah dropped out of a crowded rural public school at the tender age of 13. His teachers hardly showed up and Zedekiah had never held a textbook in his hands. When he dropped out at class 6, Zedekiah could not read at the level of a middle class urban child in class 3. Semi-illiterate and without skills, he is now 17, married and employed as motorcycle taxi (boda-boda) rider. There are millions of African children like Zedekiah. How much of the Africa rising narrative would teenagers like Zedekiah expropriate?

In many parts of rural Africa, over 60 percent of teenage girls are out of school because their families cannot afford sanitary towels, which cost only $2.50. These girls will join the ranks of millions of Africa’s young and illiterate mothers, vulnerable to disempowering poverty and lack of opportunity.

What does the Africa rising story mean to the soaring number of young Africans who make perilous trips across the Sahara Desert and the Mediterranean Sea, in an attempt to enter Europe illegally? According to the International Office on Migration, over 43,000 young Africans have lost their lives in a desperate bid to cross into Europe since 2000.

In Africa, rising incomes have disproportionally benefited the rich. For a majority of African families, growth in household disposable income has not matched gains in per capita GDP. Thus, to enable inclusive growth and prosperity, African countries must implement responsive policies, deep and sustained public investment in education and skills formation, appropriate industrialization, agriculture and rural infrastructure, affordable urban housing, water and sanitation, and labor market reforms.

Inclusive growth bolsters labor productivity, enhances health and education outcomes. Inclusive growth is the kind that breaks intergenrational poverty traps, expands opportunities in agriculture and manufacturing. Inclusive growth must build assets, create enduring wealth and deepen resilience at the household level.  In their book, The Spirit Level: Why Equality is Better for Everyone, Richard Wilkinson and Kate Pickett show that greater social and economic inclusion is strongly associated with longer and stronger periods of sustained economic growth.

Understanding and tackling the multidimensional nature of inequality and its impacts on different groups in society is critical for inclusive growth and shared prosperity. In his Apostolic Exhortation released in November 2013, Pope Francis wrote; “Some people continue to defend trickle-down theories, which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world”.

Nobel Laureate Paul Krugman believes that much of macroeconomics of the past 30 years was spectacularly useless at best and positively harmful at worst. The world needs new economic thinking to drive policies and investments for inclusive growth and participation, not trickle down, in the economy through accountable and transparent governance. Transparency and good governance matters. A recent report “The Trillion Dollar Scandal” released by ONE Campaign reveals that every year an additional 10 million children in sub-Saharan could be educated if corruption was eradicated and 500,000 more primary school teachers could be hired.

Inclusive economic growth is entwined with the political economy. In their book, Why Nations Fail: The Origins of Power, Prosperity and Poverty, Daron Acemoglu and James Robinson argue that extractive political and economic institutions lead to economic stagnation and poverty. This is especially true in societies polarized along ethnic or religious lines. Political bias is detrimental to inclusivity; hence we must pay attention to distributional effects of policies on different social groups.

Most of all, Africa must nurture a new generation of economic thinkers to re-imagine the prevailing economic model, which has produced odious growth at the top but failed spectacularly to deliver inclusive growth and shared prosperity.

Falling global oil prices could slow down investment in Kenya’s oil

Global oil prices are spinning out of control. Prices came under intense downward pressure as global output of crude oil outstripped demand, especially this year. The global benchmark, Brent crude oil fell below $70 per barrel, it’s lowest level since 2010.

What caused oil prices to rise to such unprecedented high levels?

You have to go back about nine years ago, to the mid 2000s when oil prices rose steeply owing to the unprecedented global demand caused by China’s meteoric rise. China with a GDP of $17.6 trillion is now the world’s largest economy, putting the United States in second place for the first time in 142 years.

The surge in China’s economic output and energy demand led to a large price spike, with Brent crude price holding steady at over $100 per barrel over the last four years. With what looked like a sustained surge in global crude prices, energy companies were persuaded going after tight oil would be immensely profitable.

Why are crude oil prices plummeting today?

The slowing down in global demand has triggered the inexorable decline in world crude market prices. This is due the slowing Asian economies and chronically slow and deteriorating European Union economies.

Asian economies are slowing down as fallout from “re-balancing” in China. China’s re-balancing will require lowering investment levels, increasing household consumption, which must grow faster than GDP, and reducing the role of the state sector. Several new reports indicate that the European economy is stagnating and is at risk of a deflationary spiral. The European Central Bank has downgraded growth in the euro zone to just 1 percent in 2014. The core of Europe, Germany and France, is in recession.

Another demand-supply influencing factor is the US domestic crude oil production. Domestic crude oil production levels have increased since prices spiked in 2008, exceeding net imports in 2011.

And what has been the global response, if any?

Organization of Petroleum Exporting Countries (OPEC) – a cartel of oil producers that includes Saudi Arabia, Iran, Iraq, and Venezuela – met in Vienna last week with the expectation that it would cut petroleum production to forestall the plunge in oil prices. It did not; a sign that OPEC influence in the global oil market is diminishing or we have entered an era or crude price wars.

Is OPEC instigating a price war with other oil producers, notably the United States, Russia and Brazil? Will OPEC allow global oil prices to continue falling in the hope that many of the newest exploration and drilling operations will prove unprofitable and shut down?

US companies are using horizontal drilling hydraulic fracturing to extract oil from shale formation, techniques that are more expensive than pumping oil from conventional reservoirs. Is that why Abdalla El-Badri, OPEC secretary general, says the best cause of action is to do nothing; just wait and see how the market behaves, hoping that lower prices will discourage domestic production in places like the United States?

But more importantly, how does the plunge in crude oil price affect us here in Kenya?

 Falling petroleum prices will benefit Kenyan consumers and the overall economy. The cost electricity and transportation will drop markedly, causing higher consumption of oil products. Moreover, manufactures will reward consumers with lower prices, lowering inflation and spurring spending. However, in the short term, a glut in crude oil will slow down investments in renewable, clean energy such as wind and geothermal. Increased energy consumption is bad for our climate. It means higher greenhouse gas emissions.

Substantial and pro-longed decline in crude oil prices pauses huge risks for Tullow Oil. Plummeting oil prices could reduce its operating cash flow, reduce the value of its assets and cause development plans to stall. Falling oil prices could compound other risks Tullow already faces, such as long spells of unsuccessful exploration wells, political uncertainty and shifting fiscal and regulatory terrain in all three of the African countries it operates in.

What if OPEC is determined to decimate new investments in places like the US, Canada and Africa by allowing crude prices to fall below $75 per barrel? With crude oil prices in near free fall, can an exploration-focused company like Tullow survive? Will shareholders run for the hills?

But analysts estimate that South Lokichar Basin contains valuable light oil assets that would break-even below $50 per barrel. Keep your eye on crude oil futures.