Kenyas Economy: Where to go from here


Kenyas Economy
Kenyas Economy

Kenya’s economy: Where to go from here

That Kenya’s economy is still bleeding over a year after the post-election violence is obvious. Though the free fall was projected after the bloody chaos that left hundreds dead and thousands displaced, the real picture was not clear until the economic survey report of 2009 was released.

According to the survey, economic growth dropped by 5.4%.  The economy grew at 1.7%  compared to a rate of 7.1% the year before. The growth rate is the lowest since 2003 after a lauded turnaround in that year.

Planning Minister Wycliffe Oparanya, while releasing the survey, acknowledged that last year was a bad period for the economy.  This drop confirmed what we had suspected for months; that all is not well.

The scenario is a far cry from Vision 2030’s projected economic growth rate of 10% on a continuous basis to keep Kenya on track to becoming a middle income country in about 20 years.

Without doubt, the post-election violence disrupted the country’s productive capacity as almost all sectors of the economy ground to a halt. Unfavourable weather conditions have made things worse. This has resulted in low food production and pushed prices up, thus worsening an already bad situation.  The economy also faced difficulties due to the high crude oil prices on the world market which contributed to the general rise in prices.

It is important for the economy to go back on track hence the questions: What are the issues? Who can fix them?  Are there lessons from countries that have gone through the same route?

The economy had started picking up towards the second and third quarters of last year.  Just before the country could pick up, the global financial crisis hit hard while wrangles in the Grand Coalition have shaken the already battered confidence.


New hope

There is a lull in the quarrelsome Grand Coalition Government and an uneasy return to normalcy in most parts of the country even as crop failure puts many at the risk of food shortages.

Beyond the statistics, what does the declining economy mean for the average Kenyan?  Consider the following people.

Ngotho and his family live in Nyandarua.  They have been growing cabbages and potatoes on their five-acre piece of land for the last 20 years.  Each year, favourable weather conditions have enabled them harvest more than they can consume.  This means that they can sell the surplus to earn some income.  And that is as far as the good news go.  Since most of their neighbours grow similar crops, they cannot purchase the surplus from the Ngothos.  At the local market, they are forced to sell their produce at throw-away prices otherwise they have to go home with it and feed it to the cows.  If the Ngothos don’t do this, they will end up throwing the food after it is rotten, as they lack both the technical know-how and the capital to process and store the food so as to retain its freshness.  This scenario is a boon for the middleman who buys farm produce from the Ngothos and others in a similar situation and transports it to major towns and cities.  He then sells it at inflated prices and makes a huge profit.

Then there’s Okondo in the flood-prone Budalangi plains in Western Kenya.  Year in year out, he has to abandon his family home in the low-lying area so as to stay alive, and returns only after the waters of the River Nzoia subside.  He has to start rebuilding his livelihood from scratch, literally.  In the meantime, he has to depend on donations from well-wishers for survival.  His problem is one of too much water or its management.  He laments about the Government’s failure to develop an effective response mechanism that will bring a lasting solution to the flooding menace.  In stark contrast to Okondo is Kamene’s perennial problem of too little water in the drought-prone area of Makueni.  Her family has to depend on food rations from a local non-governmental organisation for most of the year.

What hope is there for families like these and others who have to deal with problems ranging from lack of market access, floods, drought and crop failure to unemployment, escalating inflation and insecurity among others?

Even with these many issues to deal with, Kenya’s case is not unique. In fact, many developed and middle income countries were faced with similar predicaments.

Lessons from others

Down south, there is Botswana that continues to grow despite myriad problems. While it may be argued that the country’s growth is unique as its initiating source of growth was mineral wealth, it is also a fact that few countries have managed to transform mineral wealth into sustained economic growth.  It is therefore evident that Botswana’s a wide range of growth-promoting economic policies have worked to promote sustainable growth. Botswana has the highest HIV/Aids prevalence rate in Africa. Research says one quarter of the sexually active population is HIV positive. This however has not affected the country’s economic growth.

Then there is Singapore.  She has distinguished herself through the development and implementation of progressive reforms which have catapulted her to prosperity.  Today, Singapore boasts of a highly developed and successful free-market economy that has stable prices and a per capita GPD equal to that of a number of West European countries.
Way forward

Which way for Kenya?  There is no straightforward answer or prescription for our situation.  Multiple approaches at both the macro and micro levels should however help us reconstruct our economy.

In his Madaraka Day speech, President Kibaki unveiled a Shs40 billion plan that will see the Government spend on infrastructure, agriculture and establishment of special economic zones to boost the country’s export earnings.  This aggressive plan is laudable.

However, even with the most brilliant economic blueprints, political goodwill is key factor of change. The leaders should be willing to walk the talk on growth and development.

Other groups that could add impetus are, the business community and the media, with the latter reconsidering its heavy allocation of resources to just utterances by politicians to the expense of all other leaders.

Kenya has faced a rather difficult period since the 2007 but, every dark cloud has a silver lining. The lessons learned could be the key to a bright future.


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