With counties launched, most of economic drivers are now in place

Some of the 47 governors follow proceedings during the induction programme for top county officials at Great Rift Valley Lodge in Naivasha. Photo/BILLY MUTAI  Nation Media Group

By George Wachira

In Summary

• The Vision 2030 development master plan was prepared. The EAC economic union treaty was clinched. A new Constitution was launched. With the last elections county governments are now in place. The four milestones when effectively implemented will set the stage for an economic take-off, and this generates a good amount of optimism.

The other day I was on a team working on petroleum demands projections for Kenya to 2030. Traditionally, economic scenarios — pessimistic, business as usual and optimistic — have been used in petroleum demand projections. 

The team tried to look for factors (risks, threats and challenges) in the future that define a pessimistic or even business as usual scenario, but these were much fewer than the opportunities ahead of us.

The recent peaceful elections have even gone further to reduce whatever perceived threats that we had harboured in our minds. We of course still have a number of challenges ahead of us, but these can hopefully be addressed through strong and visionary leadership.

Over the past five years we have been adding to a growing list of what we have considered to be key economic drivers or facilitators.

The Vision 2030 development master plan was prepared. The EAC economic union treaty was clinched. A new Constitution was launched. With the last elections county governments are now in place. The four milestones when effectively implemented will set the stage for an economic take-off, and this generates a good amount of optimism.

The Constitution provides a very enabling environment for credible and predictable governance that can be trusted to provide business stability into the future. It also provides principles and institutions that can rein in corruption and general wastage of public resources, practices that can substantially weaken the economy.

For businesses and investors, the revamped Judiciary can now be trusted to deliver fair and timely justice in commercial and contractual disputes.

The incoming leaner government will hopefully usher in reduced bureaucracy and improve regulatory efficiencies.

All the above constitutional enhancements will provide a fertile ground for the economy to thrive, while providing confidence to attract capital from foreign investors, and development cash from donors.

The county governments are up and running, and expectations are that they will mobilise latent economic opportunities and capacities that have always been there in those counties, but have never been realised because there was not enough focus, motivation, direction and cash. Counties have varying socio-economic opportunities and strengths, and they will grow differently.

However, at the end of it all, each county will no doubt provide its incremental GDP to the national total. The catch, however, is that sufficient funding is available for deserving county projects and programmes, especially where these provide genuine value-adding employment.

The EAC is already playing its part in expanding regional productive capacity and trade through synergies, markets and co-operation. We cannot rule out larger markets with the anticipated future expansion of EAC to include South Sudan and Somalia. We may not have paid as much attention to the EAC in these past few years due to pre-occupation with local priorities by partner states.

However, going forward economic benefits are there to be realised if we accelerate and fully implement EAC economic structures and systems.

Vision 2030 development master plan has already had its initial impacts on the economy through projects that are completed or in progress. The incoming leadership should give this document enough time and support to yield results before they contemplate its review and update, which will have to be done at some time in the future.

Our future optimism should, however, be guarded. What we saw this last week with our elected leaders clamouring for higher salaries even before they embark on service delivery is a political mindset which if not corrected early enough will stand in the way of economic development. 

The new elected leadership will need to be serious with service delivery and development if we are to grow this country. A seminar on revenues and expenditures, and more so the difference between recurrent and development expenditure may be the starting point for the leaders who are agitating for high salaries.

This leads us to deficit financing, which looks to be an immediate challenge that could hamper the pace at which we drive the economy. Only enhanced revenues will determine how much of the manifesto pledges the economy can fulfil. Increased public consumptive expenditure will need to be discouraged to provide developmental expenditure that adds economic value especially in job creation.

Unemployment remains a key threat to national stability and even security. The new leadership will need to enunciate the job-creation subject at every opportunity.

In his first term in office, President Obama had the word “jobs” in nearly every statement he made, simply because joblessness was the number one threat to his presidency. This should be the case with our new President.

There is need to correctly segment and quantify the magnitude of unemployment in Kenya, and coherently plan how to reduce it. Future projects and programmes should be visibly qualified by how many jobs they have created or will create. “Jobs created” will also need to be a new metric in our future economic performance evaluation indices.

Yes, we are starting off with a high level of optimism that the economy will continue to grow, which is a good place to start off. We have in place what it takes to prosper as a country. However, if not well guarded, old habits can creep back and derail the pace of social economic development.

There is no reason why Kenya cannot consistently deliver GDP growth rates upwards of 8.0 per cent in the future. It is the central government, the county governments and the private sector that will jointly make it happen.

Mr Wachira is the director of Petroleum Focus Consultants. Wachira@petroleumfocus.co