Kenya
has made progress in the last decade. We are resilient. We bounced back when
ethnic bigotry threatened to destroy our country. But the task of building a
stable and prosperous society could never more urgent.
A
report by the Institute for Security Studies revealed that with 40 percent of
the population living in extreme poverty, Kenya is the sixth poorest country in
Africa. Last week the World Bank declared that Kenya’s economic growth is among
the fastest in Africa and GDP was expected to reach 7 percent in 2017.
This
paradox is not inexplicable. Ambitious government spending in infrastructure,
especially in energy and the standard gauge railway due to expansionary fiscal
policy characterizes Kenya’s impressive headline GDP. But a majority of Kenyans
remain poor, disconnected from the benefits of economic growth because Kenya’s
manufacturing sector is stagnant and agriculture is comatose.
Kenya’s
formal manufacturing sector is minuscule and the outlook is bleak. It employs
280,000 accounting for just 12 percent of Kenya’s labor force. Moreover,
productivity of the manufacturing sector is depressing. The value added per
worker in Kenya’s manufacturing sector is only $1.11 per day (about Sh. 100).
Kenya’s average share of manufacturing value added in GDP is estimated at 10
percent, unchanged from the 1970’s.
A
majority of Kenya’s farmers and agricultural workers are trapped in collapsing
rural economies. The dysfunction of Kenya’s rural economy has been aided by
poor infrastructure, especially roads, energy, water and essential social
services such as health care and high quality schools. Low investment in
agricultural research, compounded by broken extension services has contributed
to low productivity and little innovation. Productivity in Kenya’s agricultural
sector is estimated by the World Bank at about $1 per worker per day, compared
to about $13 in Nigeria.
Kenya’s
export sector has been sluggish for the past 25 years. Tourism has been
buffeted by insecurity and poaching, especially over the last couple of years. About
40 percent of Kenya’s manufactured goods are exported to the East African
Community. But our regional exports are under competitive pressure from imports
from China and India. Furthermore, depressed economic output from the European
Union has huge consequences for Kenya’s export sector as well as tourism.
A
strong hand of the state through expansive fiscal policy underlines Kenya’s
growth in the past decade. However, as exemplified by low productivity in both
the agricultural and manufacturing sectors, the fundamentals for a broad based growth
are feeble. Moreover, integrating into global financial markets through
sovereign bonds makes Kenya vulnerable to external financial shocks. Hence, a
large part of Kenya’s impressive GDP growth is not organic and is therefore
unsustainable.
The
path to economic prosperity takes more than a narrow expansionary fiscal policy
vision. Inclusive growth and shared
prosperity demands careful social and fiscal policies that re-engineer’s
Kenya’s flawed economic structure.
Of
what value is an ultra modern railway line and a 10,000 MW energy capacity
achieve when agriculture and manufacturing are declining? We must invest in higher
education and research capacity to drive growth in productivity to boost output
and competiveness. Our universities must be the engines of growth and
structural transformation, through research-intensive programs, unleashing
technological advancement and innovation.
Public
universities are underfunded and burdened by intensive and mediocre teaching
programs. We are woefully short of vital execution capacity. This is why we
have Tony Blair leading Mr. Kenyatta’s Presidential Delivery Unit. And there
are innumerable expatriate advisors in the civil service.
The
same zeal for public spending on security, roads, railways and energy must be
applied to building technological capacity, human capital and investing in
smallholder farmers and pastoralists. Critical public research infrastructure
must move to the university. Hence, research organizations like Kenya
Agricultural and Livestock Research Organization, Kenya Medical Research
Institute, Kenya Industrial Research and Development Institute should be
integrated into research and teaching programs in public universities.
Sustainable
and inclusive economic growth will not come inevitably through expansive fiscal
policy. There is no such thing as trickle down from big government spending. Building
inclusive prosperity demands careful, deliberate investment especially in
research and teaching in our universities to shape public policy, drive
technological advancement, spur innovation and raise productivity on our farms
and rangelands, and on the factory floor.
GDP
growth will not count until tangible wellbeing outcomes flow to farmers,
pastoralists and the semi-skilled laborers who toil hard and long for this
great land.
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