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10 per cent annual growth is achievable

Aug 28, 2005 Strategy, Sunday Nation

There is a certain buzz in the air about economic growth in Kenya. After the government announced that the economy was growing at 4.3 per cent per annum recently, a new excitement began to swell. Yes, we all know that the 4.3 per cent has only been achieved after fiddling with the calculation formula and including activities that were not captured before. But that’s neither here nor there.

However we care to measure it, achieving 4 or 5 per cent annual growth is entirely within our grasp. We are a reasonably open, reasonably diversified economy. We have a wide variety of mature sectors, ranging from horticulture and tourism, to banking and telecommunications. By and large, the intensity of competition is increasing in these sectors over time (albeit painfully slowly in some cases). All we need is for a handful of these sectors to start firing at the same time for the economy to pick up.

We can look at it this way: 5 per cent growth is simply the evidence that we are not doing things too terribly wrong. It is what is achieved when the owners of business in the country crack the whip and extract a return. It happens when a sense of ‘feel-good’ (real or imagined) spreads through the economy and the owners of capital start expanding their existing investments or put their money into new ones. It also happens when government activity (often donor-fuelled) starts to pick up and provides an engine for the economy – procurement of goods and services, or investment in roads and other infrastructure.

None of that is news. All of that is happening. All those things are well within our reach. Our export sectors will very likely take advantage of stable exchange rates and burgeoning overseas demand. People with capital (modest or vast) may well decide to sink some of it into a long-term local investment (a plot of land, a house, a business, shares). And a government in the second half of its term will undoubtedly go on a “development” spree – giving the people roads and clinics so as to have a record to point to in 2007.

So, if we don’t have any more massive corruption scams rearing their very ugly heads; if we avoid civil strife and violent unrest over the constitution (or any other issue that we enjoying fighting about); if we don’t suffer external “shocks” like a massive oil price spike or terrorist attacks; then, hey, 5 per cent? A piece of cake. Really.

But 8-10 per cent? That’s another matter entirely. And it is that kind of annual average growth over ten, twenty or thirty years that this country actually needs to aim for. For it is that kind of sustained growth that allows a country to make any meaningful dent on poverty and lift the great mass of its people out of destitution.

Look around. Singapore did it: it achieved an annual average of 8 per cent from 1960 to 1999 – a truly extraordinary flight path that took it from third-world to first-world status in one generation. It now operates at full employment and has little or no poverty to speak of. China did it: it grew by 10 per cent every year between 1980 and 2000. In doing so, it reduced the proportion of its people in poverty from nearly 30 per cent to under 10 per cent. Closer to home, Botswana did it: it has often boasted the world’s highest growth rates, despite being amongst the world’s poorest countries at independence. Its GDP per capita is the envy of Sub-Saharan Africa.

That’s called participative development – when the wider population partakes in (and reinforces) growth, and the common person improves his or her lot in a robust and consistent fashion. Our type of growth, however, is about enriching the elites and everyone else waiting for “trickle-down”. Our type of growth fattens the wallets of “winners” and throws crumbs at “losers”. Our type of growth plateaus at 5 per cent. Our type of growth creates divisions, conflicts over resources, and ever-mounting insecurity.

So what do we need to learn? Simply to stop excluding the majority of the people of this land from economic development. We do not do this by giving them handouts, or by having special welfare programmes. We do it by giving them education, primary health care and access to markets. We do it by giving them rights to their property and productive assets. We do it by giving them feeder roads, telecommunications and affordable power. We do it by giving them a stake in the economy by encouraging wider share ownership. We do all these things, and then we get out of the way.

It is easily forgotten that growth comes from people. When we measure economic activity, we are simply measuring the outputs from the daily toil and transactions of the people of the land. Indeed, long-term growth in economic output is determined only by two things: the number of people working, and the output per worker (or productivity). Those two things in turn have drivers: investment in productive capacity; the level of skills in the economy; a free market that ensures production is focused on things that people actually demand, and that people have the incentive to use resources efficiently; and advancements in technology that allow productivity to keep growing.

So economic growth is really neither rocket science nor dismal science. Put people to work, and give them the tools with which to work well. Is this, after all, what our economist-president’s “working nation” philosophy is all about? Perhaps. But we can also judge a working nation by what it is not. A working nation is not one where the toil of thousands, materialised in things called in “kiosks”, is routinely and regularly swept away by the thugs of the state (without ever providing any alternative framework in which to conduct business). A working nation is not one where the majority of the people have no tap, no power line, no telephone line and no road to market.

A working nation does not use licenses, permits and permissions to limit market participation to a few people wearing the right tie. A working nation is not one where most leaders’ idea of work is to skive off from their workplace (parliament) and conduct “work”-shops in serene coastal settings.

All nations are given resources. For Botswana it was diamonds; for Singapore, a tiny nation of islands, it was the resourcefulness and determination of its people. But both countries harnessed their respective resources very well. Singapore combined its labour force with the capital of foreigners to give itself a head start. Botswana ensured that its mineral wealth was shared equitably and channelled into health and education facilities. Both made certain that they developed very strong anti-corruption institutions and gave them real teeth (not the false set of easily removed gnashers with which we seem to arm our fraudbusters).

10 per cent growth? The only thing standing in the way is us.

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