SPREADING BENEFITS OF ECONOMIC GROWTH

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June 08, 2006

SPREADING BENEFITS OF ECONOMIC GROWTH
BY ISAIYA KABIRA

Does economic growth ever signify improved fortunes for the citizens? This is the important debate that has been raging as two separate but somewhat related events took place in the last two weeks. On one hand the World Economic Forum held its annual meeting on Africa, under the theme 'Going for Growth'. The meeting acknowledged that Africa's average economic growth rate of 4.5% last year was inadequate to generate enough employment.

In Kenya the annual Economic Survey was released indicating that the economy grew by 5.8%, heralding much debate on the figures presented. Mine is not to digest economic theory but to ask 'where do we go from here?'

A few issues have since crossed my mind. One I was reminded that in order for a nation to double its per capita income it must grow at an average 8% for a successive 10-year period. ( Before you dismiss me do your math and check out how long that 1,000 shillings will translate into 2,000 if it was earning an 8% interest per year.)

Secondly I was reminded that we have over 2 million unemployed Kenyans while close to 450,000 join the job market every year on completion of schooling at various levels of education, yet the government gets bashing over the issue of 500,000 jobs per year, instead of focussing on how we can increase the number of jobs created.

These realties therefore must form the basis of our national debate on the way forward on matters economics.

When President Kibaki took over the management of the country's affairs he set out a target economic growth rate of 7% by 2007. In 2002 the economy grew by 1.8%, which means that in his fourth year in office the President has moved the growth rate 4 percentage points and could as well be on course to achieve the 7% growth by next year.

The President deserves more credit for his economic stewardship than he is currently getting. Politicians who had previously dismissed his leadership are thinking twice, and must make their contribution to focussed debate on issues that can help consolidate the economic gains.

In his June 1st speech President Kibaki outlined ways of ensuring that the country's growth is shared and felt by more Kenyans who have had to suffer the pain of poverty. The President fully acknowledged that ' some sections of our country are yet to feel the full impact of our economic growth', but clearly outlined what measures he is undertaking to correct this state of affairs.

Slow return on social investments

If truth be told the current government has engaged in one of the most ambitious social investment programs in the nations history. Social investments in areas like education and health are long term in nature and take time to pay dividends. South Korea for example achieved universal access to primary school education in 1960 and this was to pay-off in their industrialisation age with a steady flow of skilled and semi skilled labour in the nascent industries in textiles, electronics, vehicle manufacturing and assembly.

Challenges and Realities

We are also facing other stark realities in some of the growth sectors, where growth may not have translated in more jobs or increased wages. For example in tourism, after years of slow tourist arrivals we are now witnessing a steady flow. More people are now assured of their jobs for a longer period of time- those who only secured employment for the four months high season are now getting more months employment- so jobs may not have increased but they are more regular.

If you look at the tea and horticultural sub-sectors and E.P.Z.'s, the increased export earnings may not be translating in an increased wage bill, but what we should be debating is how employees in these areas can earn a fairer wage that will not out price Kenya in the global labour market.

In the public service the government has made effort to better pay the public service, leading to a higher wage bill. The government is however focussed on having a leaner, better paid and motivated public service that can guarantee efficient service delivery.

Productivity curve

Again here we must subject both the public service and our better paid members of parliament to the productivity curve. This curve basically indicates that the productivity of any employer rises with increased pay up to a certain level when productivity stagnates and thereafter any further pay increases actually lead to reducing productivity.

Economic model

Debate is also raging on what economic model we shall adopt as a country. Kenya now has a rich history of ups and downs. The government for example cannot completely withdraw from business. The China economic model is based on one big entrepreneur called the government that is able to control the whole production cycle - from cost of power, cost of money and transport to the value of the local currency vis-a vi the dollar. This has helped Chinese goods and services to be some of the most competitive around the world.

In Kenya, the government should be allowed to play some role especially in agriculture that is our mainstay. We cannot subject our farmers to extremes of external competition while remaining at the mercy of extremes of weather.

Kenya government can be a price stabiliser - e.g. the role of K.C.C., K.M.C an d N.C.P.B.
But while encouraging our farmers we should strike a balance between good producer prices for our farmers and urban consumers who must not be subjected to high food prices especially day to day consumables like maize flour, milk and sukuma wiki.

Way forward-sharing growth

So what are some of the suggestions and current interventions?

Value addition in agriculture is a must- if we are to deal with poverty- there must be as few middle men from the moment our farmer harvests his French beans to the time when the product lands in the supermarkets and kitchens of Europe.
The Land reforms that the government has begun should be supported and encouraged not politicised. Land still remains the biggest factor of production in an agricultural country like ours.
It is important to encourage new age industries in I.C.T. but we must remember that even countries like India that embraced I.C.T. over ten years ago, only 250,000 jobs can be directly attributed to the sector. The fact is that an agrarian revolution still remains our best bet at poverty alleviation.
Infrastructure development- need for innovative ways of raising funds locally. Initiatives towards introducing infrastructure bonds should be fast tracked, as suggested by the President in his Madaraka Day Speech.
We must unlock the funds for small enterprises- President has made several appeals to parliament to pass S.M.E. laws- big business should be encouraged and made to feel obliged to supporting local artisans and entrepreneurs.
C.D.F.'s must be taken to the next level- a people who were punished through harambees as their chicken were forcibly sold to raise funds must demand a say in the use of C.D.F money. These must not be used to satisfy the whims of the political class but there must be a deliberate effort at funding poverty alleviation projects.
Water access must be a priority - the benefits of saved time by our mothers who have to fetch water and the hygiene and health benefits of access to clean water cannot be overstated. Constituencies should have goals of reducing the distance families have to travel to fetch water- and this should be brought down every year, through CDF initiatives.
Planned urbanisation- what the President has consistently called making our urban centers better and more secure places to live and work in. The rallying call of turudi mashambani may have been a well- intentioned policy but now we must face the reality that as our people get more educated the attraction to urban centers is very real. This is the reality check that will see more investments in our upcountry urban centers and make them more attractive and ease the pressure on the city.
Form of protection for local industries- even if not on the scale of the import substitution scale for our industries. The protected young Asian industries producing sub-standard goods in the 60's and 70's are today the multi national corporations producing goods for the world that Europe and America can no longer produce competitively. In another few years the labours costs of Asia will no longer be competitive but the shift of the production bases will only be to countries that are well prepared. The debate on our competitiveness should be getting good coverage in our media.
Kenyans must get value for money- President has already asked that the timeline and cost of roads be published along roads under construction-bonds for infstraructure development.
Democratising our co-operative societies that remain the best avenue of mobilisng savings and cheaper credit
Constitution and coalition politics- need for future power sharing agreements to be based on a new or current constitution to avoid the kind of impasse Kenyans were treated to in the first 3 years of NARC rule and which is already exhibiting itself in current political re-alignments.
Improved security-need for all to support community policing
Dealing with AIDS, malaria and tuberclosis- as the First Lady Mrs Lucy KIbaki has said we must stop glorifying condom use among the youth. It has been proven that Voluntary Counselling and Testing Centers remain a great leap forward in the fight against HIV/AIDS

Finally I wish to emphasis the importance of the media in re-focussing debate and its important role in determining the national psyche.

The media deserve great credit for informing Kenyans on the opportunities of the just concluded KENGEN I.P.O. and should do more to educate Kenyans on some of the opportunities that exist in the economy. Getting our people to enjoy the full benefits of shared economic growth will benefit from sharing of information relevant to the challenges of our times.

(The writer is the Director of the Presidential Press Services)