Kenya may be grow­ing but ‘You can’t eat GDP’

Kuwait Times - - BUSINESS -

The tim­ing was per­fect. Two months be­fore Kenya’s Au­gust 8 vote, Pres­i­dent Uhuru Keny­atta in­au­gu­rated the na­tion’s big­gest in­fras­truc­ture project: a rail­way con­nect­ing the cap­i­tal Nairobi and the port of Mom­basa. With pomp and cer­e­mony Keny­atta touted the rail­way as proof of his cam­paign prom­ises on the econ­omy, yet at the same time the price of maize flour, a Kenyan sta­ple, was ris­ing fast, stok­ing anger, es­pe­cially among the poor­est.

Ris­ing food prices con­sti­tute a cri­sis on the eve of a high-stakes elec­tion in which Keny­atta, and his eco­nomic record, go head to head with long­time op­po­si­tion leader Raila Odinga.

“On the one hand, there’s the sym­bol of Kenya which con­tin­ues de­vel­opingeven though it means an in­creased deb­tand re­mains the most dy­namic econ­omy in East Africa,” said Fran­cis Mwangi, an an­a­lyst at Stan­dard In­vest­ment Bank. “On the other hand, there’s the Kenya which hardly ben­e­fits from the ef­fects of eco­nomic growth.” Keny­atta has put the econ­omy at the heart of his cam­paign. Thanks largely to in­creas­ing house­hold con­sump­tion and pub­lic in­vest­ment Kenya has seen growth of more than five per­cent a year since his elec­tion in 2013. But an­a­lysts say there is more-and less-to Kenya’s econ­omy than meets the eye.

The coun­try’s debt is ris­ing, cor­rup­tion is en­demic and eco­nomic growth has not ben­e­fited the coun­try’s poor, they say.

Not your av­er­age African econ­omy

As in many other African coun­tries, agriculture is the dom­i­nant ac­tiv­ity, but Kenya’s econ­omy is atyp­i­cal in other ways. It has rel­a­tively few nat­u­ral re­sources, but the coun­try’s sta­bil­ity, eco­nomic dy­namism and well-de­vel­oped ser­vice in­dus­try stand out. Keny­atta has presided over a slew of in­fras­truc­ture projects, in­clud­ing air­ports, roads, bridges, the start of a new port in the town of Lamu and wind and geother­mal en­ergy plants to boost elec­tric­ity pro­duc­tion.

Ethiopia’s larger, cheaper work­force means it re­cently over­took Kenya as the re­gion’s big­gest econ­omy, but an­a­lysts say the world’s largest tea ex­porter re­mains East Africa’s most dy­namic mar­ket thanks to its skilled work­ers, fast in­ter­net and en­tre­pre­neur­ial mind­set.

Ter­ror warn­ings and at­tacks, in­clud­ing the 2013 ji­hadist as­sault on Nairobi’s West­gate mall, scared off tourists for a while, but the coun­try’s In­ter­na­tional Mon­e­tary Fund rep­re­sen­ta­tive Ar­mando Mo­rales said the coun­try has since bounced back. “De­spite that, the GDP grew quite well, and con­di­tions for business have im­proved,” he said.

But not all of Kenya’s progress can be cred­ited to Keny­atta. His term in of­fice co­in­cided with low oil prices and his eco­nomic poli­cies broadly match those of his pre­de­ces­sor who kick­started some of the more eye-catch­ing in­fras­truc­ture projects Keny­atta takes credit for.

De­vo­lu­tion has given coun­ties more money and power, which has led to im­prove­ments in health in­fras­truc­ture and the con­struc­tion of wells and dams, said Win­nie Mi­t­u­lah, a de­vel­op­ment spe­cial­ist at the Univer­sity of Nairobi. But gov­ern­ment spend­ing on new pub­lic works has caused Kenya’s debt to bal­loon, in­creas­ing dur­ing Keny­atta’s term to over 50 per­cent of GDP, much of it owed to Chi­nese lenders who ne­go­ti­ated ad­van­ta­geous terms.

“I think Kenya had to make those in­vest­ments,” said Aly-Khan Satchu, a Kenyan an­a­lyst. “But now, they need to reap the ben­e­fits of those in­vest­ments, but they also need to space the next in­vest­ments care­fully.”

Wide­spread cor­rup­tion

Ob­servers say it’s dif­fi­cult to talk about Keny­atta’s eco­nomic record with­out in­clud­ing his poor per­for­mance in bat­tling cor­rup­tion.

Graft is wide­spread in Kenya, and while Satchu said it is dif­fi­cult to tell just how deep it runs, he be­lieves it rep­re­sents a ma­jor drain on the econ­omy. “Look where Kenya is now, and imag­ine where it could be with­out all that money dis­ap­pear­ing through cor­rup­tion,” he said. Per­haps the big­gest crit­i­cism lev­elled at Keny­atta is that de­spite the growth, Kenya’s poor haven’t seen much im­prove­ment in their daily lives, Mwangi said. That’s in part be­cause Kenya lacks a strong man­u­fac­tur­ing base able to pro­vide mass em­ploy­ment.

A drought since late 2016 has re­duced agri­cul­tural pro­duc­tion, hit­ting the poor­est hard­est. Com­pound­ing the prob­lem, pro­duc­ers spec­u­lated and the gov­ern­ment was slow to re­spond.


MOM­BASA: This file photo taken on May 30, 2017 shows a cargo train with Kenyan Pres­i­dent Uhuru Keny­atta on board as it leaves the con­tainer ter­mi­nal at the port of the coastal town of Mom­basa.

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