This article first appeared in my weekly column in the Business Daily on May 3, 2015
A fourth quarter analysis of the Budget by think-tank Institute of Economic Affairs (IEA) reveals that the government failed to spend 27 per cent of its annual budget. The main challenge is the low uptake of the development budget — only 52 per cent of this budget was utilised by the end of Q4. It further reveals infrastructure-related ministries are the slowest spenders.
IEA makes the valid observation that slow disbursement, especially of donor funds, is a core problem as only 51 per cent of donor-financed development budget was released by the end of the financial year. However, there is a deeper story to this under-spending — low absorptive capacity.
Absorptive capacity here relates to the macro and micro-constraints that countries face in using resources, in this case money, effectively. Although donor disbursement may be one issue, we still have to ask: does Kenya have the technical, intellectual and systems-related infrastructure, expertise and culture to competently implement all the development projects we have planned?
Take a look at some figures. Kenya’s current ratio of engineers is 1: 6,328, nearly three times the ratio of 1: 2,000 recommended by UNESCO. In short, in order for Kenya to meet its development needs in infrastructure, it has to triple the number of engineers. Kenya is getting into a great deal of debt to finance infrastructure in particular. Further, a preliminary look at this year’s Budget reveals that energy, infrastructure and ICT will take 16.6 per cent of the Budget. But does Kenya have the capacity to implement these ambitious plans?
It appears even if every engineer were employed to work on infrastructure projects, there would be a shortfall. And this is assuming all engineers trained are competent enough to manage the projects. So what is the government’s answer to this? Outsourcing ad nauseum. But there are serious problems with chronic outsourcing. Firstly, it hides Kenya’s skills deficit and, secondly, it pumps money out of the country.
The first point is obvious: if Kenya continues to rely on others to build our roads, the country will continue to lack the skillsets and capacity to competently build roads by itself. But since the roads are being built, the country doesn’t truly feel the weight of incompetence in this area and therefore does not have a sense of urgency to rectify this problem.
Secondly, companies implementing projects locally make a profit, sometimes after loaning Kenya the money to do the projects in the first place. Essentially Kenya is borrowing money from a country like China then paying it to do the project. This makes no sense because the country is getting into a vicious cycle as follows: Kenya doesn’t have the capacity to implement large-scale projects → Government outsources but fails to ensure skills transfer → Hides/ exacerbates the skills deficit → Kenya doesn’t have the capacity to implement large-scale projects.
The government should use development projects led by foreigners as structured training opportunities for newly qualified professionals as well as incorporate seasoned professionals into the management structure of projects. Kenya cannot continue to so fundamentally rely on outsiders to do the basics for us such as building roads. But sadly, the government seems happy with outsourcing all the large-scale projects. It is time Kenya faced the absorptive capacity problem squarely and developed a clear strategy to foster sustainability.
Ms Were is a development economist. Email: email@example.com; twitter: @anzetse