Keep the economic good news coming
A reader of this column wrote to me recently and suggested that its title be changed to ‘A Cloudy Day’! Why? Because I apparently dish out too much of a mental battering on Sundays, which are for picnics and relaxation.
Easy, guys. I’m no pessimist; if I were, I would not bother to write this column week after week. I do believe very firmly, however, that a refusal to accept the root of our problems underlies our malaise. We are all complainers and like to spread the blame far and wide, everywhere except the place where it ultimately belongs – in our own hearts and minds. But if you catch this column dwelling on problems rather than workable solutions – do shout again. In the meantime, the kelele will continue.
Nevertheless, there is a truth to be recognised here. When the sunshine of good news lights up our skies once in a while, we should acknowledge its presence. There is some good news about right now; and believe it or not, it concerns the economy.
I can feel the protests of all you inborn cynics out there welling up in synchrony. Good news, you all shout? Have you been reading the papers? Report after recent report has damned Kenya in quick succession. We are on the lowest rung of human development, says UNDP. We remain chronically corrupt, says Transparency International. We are on the verge of being classified as a failed state, says the Heritage Foundation. Our universities are nowhere in world rankings, and mediocre even by African standards, says Internet Lab. And this week, our own Central Bureau of Statistics told us how pronounced regional inequalities are across the land.
All of that is true. But consider this: the economy is actually in better shape than it has been for a decade or more. Let’s start with GDP growth. The economy grew by 4.3 per cent last year (I know, I know – they changed the formula for calculating GDP. That’s old news. Let’s use the new measure to go forward from here). Even the most conservative commentators expect a 5 per-cent-plus growth rate for 2005, and the signs are that 6 percent is within our grasp fairly soon. This growth is being driven by a few outstanding sectors: horticulture, coffee, tourism and services in general.
The good news doesn’t end with growth. We are experiencing unusual stability in other key economic indicators. Inflation has generally behaved itself and may well be contained at single-digit levels for the foreseeable future (though spiralling oil prices are a major threat). The shilling appears to be doing a disciplined waltz in the arms of the world’s major currencies. Interest rates may not have stayed at super-low levels for too long, but they have at least stabilised at 8 – 9 per cent, seemingly in line with fundamentals in the economy.
It would be instructive at this point to take a short trip backwards in time, and remind ourselves of where we came from. Those of you with memories extending back to the 1990s remember it well, I’m sure: a regime in which the cost of plunder was so high that we ran huge fiscal deficits every year. This was financed by heavy public borrowing, which in turn caused interest rates to be at persistently high levels. Private investment was elbowed aside, growth stagnated and the economy teetered on the brink of collapse for years. Ugly stuff.
Whatever you say about the inadequacies of the Narc era (and you could write a two-volume book on that subject), the fact is that we are in a different economy now. The past is truly another country. Much of this turnaround can be put down to good economic management. The Kenya Revenue Authority has surpassed all expectations in tax collection, allowing the government unprecedented fiscal leeway and reducing our unhealthy dependence on donors. The Central Bank of Kenya is, by and large, operating to provide monetary stability rather than at the whim of power barons. Even some of our moribund parastatals are waking up and (ever so slowly) showing signs of financial turnaround.
Privatisation and liberalisation, after several false starts, is picking up pace again. Our once-renowned ‘lunatic express’ railway is finally in private hands, and should boost trade and lower transportation costs – and will contribute handsome amounts to the Treasury every year. Jomo Kenyatta International Airport will undergo a major upgrade next year, allowing it reclaim its place as the unchallenged regional hub. The East African Submarine Project will provide us with global low-cost fibre-optic connectivity in years to come. Competition in the telecommunications sector should result in a dazzling new array of services and lower the cost of doing business.
We could go on. The boom in the Nairobi Stock Exchange Index, predicted by many to be a short-lived expression of “irrational exuberance”, has been underpinned by consistently strong profit announcements by most leading corporations. The tax holiday granted recently to newly listed firms may well herald a boom in new listings, allowing wananchi to own a stake in many exciting companies. Peace in Sudan is very likely to spark a boom in Kenyan-sourced construction and other services. Remittances by Kenyans abroad are proving to be a growing source of support for poorly off Kenyan families, and are providing a significant boost to the balance of payments.
Now, used to dismal economic news as we are, we do have to rub our eyes and ask ourselves: why is this happening? There are two significant factors at play. The first is that we are a naturally entrepreneurial nation. Our ethnic diversity gives us many more degrees of freedom – a wide base of self-driven economic activity. There is nothing “irrational” about our economic exuberance: it is based on a widespread passion for business and economic self-determination at all levels – the burgeoning informal sector provides ample evidence of that. All we need is effective supervision; the economy generally ignites itself.
The second driver is the successful “ring-fencing” of economic management from political imperatives. This is indeed a novelty; under Kanu the economy twisted and turned to the tune of politicians. My political-analyst friend Wachira Maina explains this by reminding us that this government’s main political and financial bases are very economy-sensitive; Narc cannot afford to alienate its core support through mismanagement.
But will it continue? The recent signs are not good. Referendum frenzy has led to many breaches of the ring fence – land deeds, pay increases and even national parks are being doled out in return for votes; and state resources are being squandered in the furtherance of political hot air. All of these acts will have economic repercussions. This new laxity demonstrates that when the political chips are down, good sense on the economy tends to be thrown out of the window. And I fear those chips may remain down for a while now; the political signposts are signalling “turmoil ahead”.
Perhaps when you’ve stopped exchanging abuse, leaders of Kenya, you might care to delve into deeper issues and ensure that the economic sunshine falls on more faces for more years to come. It’s actually what we pay you for.