Summary
- CBK Governor Patrick Njoroge Monday said that households have not felt Gross Domestic Product (GDP) growth, arguing that increased infrastructure spending has not... spread wealth among working Kenyans.
- The comments come in a period when corporate Kenya has witnessed reduced profitability that has ushered in job cuts, freezes in hiring and near stagnant wages as companies race to protect their profit margins despite a 5.6 percent growth in the second quarter to June.
- The number of formal jobs generated by the economy fell to a six-year low in 2018, worsening the plight of school leavers in the year that the Jubilee administration recorded its best economic performance with growth at 6.3 percent.
The Central Bank of Kenya (CBK) has faulted the structure of
Kenya’s economy for delivering economic growth without creating jobs or
an increase in incomes.
CBK Governor Patrick Njoroge
Monday said that households have not felt Gross Domestic Product (GDP)
growth, arguing that increased infrastructure spending has not spread
wealth among working Kenyans.
The comments come in a
period when corporate Kenya has witnessed reduced profitability that has
ushered in job cuts, freezes in hiring and near stagnant wages as
companies race to protect their profit margins despite a 5.6 percent
growth in the second quarter to June.
The number of
formal jobs generated by the economy fell to a six-year low in 2018,
worsening the plight of school leavers in the year that the Jubilee
administration recorded its best economic performance with growth at 6.3
percent.
“It is true you have GDP numbers but you
can’t eat GDP,” said Dr Njoroge during the launch of the International
Monetary Fund (IMF) regional outlook report. “At the end of the day,
what is needed is specific income. That is what anybody else wants. Plus
jobs.
“That is why we say central composition of growth is important
because if it is just driven by infrastructure, that doesn’t quite bring
income to your grandmother. She needs to care not because it is 6.5
percent but because of what really hits her pocket books.”
Kenya
has since 2013 embarked on major infrastructure projects to make up for
decades of under-investment that stunted economic growth.
This
is underlined by the construction of the Standard Gauge Railway from
Mombasa to Naivasha using nearly Sh500 billion of Chinese loans in a
borrowing binge that economists say is saddling future generations with
too much debt.
“We may see a very good growth, but we
are very much aware that it is not reaching the disadvantaged,” said
Geoffrey Mwau, the director of budget at the National Treasury.
The
drop in new jobs combined with stagnant wages raise queries over
equitable distribution of the growth dividend among Kenyans considering
the economic growth expansion witnessed recently.
While
Kenya’s economy expanded 6.3 percent last year from 4.8 percent in
2017, private sector activity — which translates to jobs and higher pay —
has remained muted.
“If you look at the employment
index (in the PMI) since the beginning of 2017, it’s been quite neutral,
meaning it’s not like there has been improvement in new jobs,” said
Jibran Qureishi, the regional economist for East Africa at Stanbic Bank,
which tracks company performance monthly through the Purchasing
Managers’ Index (PMI).
Economic Survey 2019 data shows
that 78,400 new formal jobs were created in the economy in 2018 compared
to 114,400 in 2017. This was the slowest pace of formal job growth
since 2012 when the economy churned out 75,000. The data does not
capture job cuts and net employment.
Companies are
struggling with reduced sales and profits in the soft economy. More than
15 of the 62 companies listed on the NSE reported net profit drops by
at least 25 percent last year compared with 2017.
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