Month: January 2017

The economic cost of marginalisation

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This article first appeared in my weekly column with the Business Daily on January 29, 2017


Over the past week I have been travelling around the country and have visited what can only be described as grossly neglected areas of the country. The difference between the state of infrastructure, water and sanitation systems, schools and even internet access in areas which have enjoyed government and private sector investment, and those which have not, is truly stark. And although devolution has brought some attention to counties and communities locked in neglect, a pattern of leaving ‘those areas’ to the NGO world and food relief organisations still lingers. This chronic marginalisation is costing the country millions.

Firstly, the lack of investment in human capital mainly in the form of education, healthcare as well as physical and food security has implications on productivity. In failing to ensure that every Kenyan is well fed and has access to basic healthcare and schooling, the country has written off millions of Kenyans, their ingenuity, their potential and their ability to develop the country. Individuals who are sick, poorly educated and malnourished are far less productive than those who are healthy, well-educated and food secure. The neglect has meant that employment-creating businesses were not opened, important innovations not discovered and ingenuity not tapped into, all of which could have had a positive impact on the country’s economic development.

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Secondly, there is a notable lack of support to businesses in vast swathes of the country. In those areas, businesses often fail to become successful due to external factors, not due to a lack of intelligence, determination or business acumen. Many good business ideas die due the lack of transport infrastructure and electricity rather than because the business idea was a poor one. If Kenyans marvel at how Thika Highway unlocked entrepreneurship along that road alone, imagine what a truly robust transport network could deliver. Business in many parts of the country do not take off due to external factors and as a result entire regions of the country fail grow and contribute to the GDP and wealth of the nation.

Finally, even if small pockets of private sector activity thrive in neglected areas, they probably function at subpar levels, unable to expand and grow optimally. Not only do they have to live with the reality of poor transport and energy networks, finding skilled labour for business operations is close to impossible due to low levels of education and a high disease burden. And if individuals manage to earn an education in such areas, they often leave the region as soon as feasibly possible. As a result, businesses in such regions operate below potential leading to subpar contributions to the economy.

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(source: http://www.standardmedia.co.ke/images/wednesday/Poverty_Standard_040913.jpg)

However, as with all clouds, there is a silver lining. There is a grit, resolve and spirit of determination in areas that have been forgotten. While some have resigned to their lot, others have a tenacious spirit determined to succeed. But what is clear is that there is a need for creative investment strategies to develop remote regions executed through blended financing and alliances of public, private and civil society actors. It is clear that just one type of financing or support is inadequate. There is a need for professionals and business people to step out of their bubbles and leverage their combined financial and skills assets towards shared interests. Without the pooling of resources and talent, the potential of millions of Kenyans will continue to go waste and fail to build the personal and communal wealth the country so desperately needs.

Anzetse Were is a development economist; anzetsew@gmail.com

 

The economics of the doctors’ strike

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This article first appeared in my weekly column with the Business Daily on January 22, 2017

Doctors in Kenya went on strike in December 2016 due to on-going concerns with regards to numerous issues including remuneration, working conditions, promotion and transfer policies, doctor occupational safety issues and inadequate health staff and facilities.

Both the press and national government have given Kenyans the impression that the main demand being made by doctors is focused on a 300 percent pay increase. However, a public announcement released by the Kenya Medical Practitioners, Pharmacists and Dentists Union (KMPDU) stated concerns that, ‘in all its offers the government has addressed itself solely on a non-existent 300 percent pay increase demand and has refused to give its position on the non-monetary issues’. Thus while there are requests by doctors to improve compensation, there are other demands that would benefit the greater health of Kenyans including a call to hire more doctors and better equip hospitals.

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(source: http://s1.ibtimes.com/sites/www.ibtimes.com/files/styles/lg/public/2012/03/08/245904-kenya-doctor-strike.jpg)

However, it must be said that although the CBA the doctors seek to have honoured is not solely on remuneration issues, their demands would have financial implications. For example, there is a demand to hire 1,200 doctors per year for four years, making a total of 4,800 new doctors. It cannot be denied that honouring this request in addition to meeting the demands of increased compensation and better equipping medical facilities would be an expensive endeavour; and that is likely why national government has yet to broker an agreement with the doctors.

The reality is that Kenya’s fiscal space is narrowing and the ability of national government to take on added costs is becoming increasingly limited. Last year the government overshot its fiscal year debt target having borrowed KES 147.1 billion against a target of KES 106.0 billion. The public debt to GDP ratio stands at about 52.8 percent, well above Treasury’s 45 percent ceiling; and the fiscal deficit is at 8 percent, well above the 5 percent target. Indeed, the country has acquired public debt to the extent that a fifth of the budget is committed to repaying loans. The national government seems to have acquired the habit of chronic over-spending. And while debt levels are still thought to be sustainable, bodies such as the IMF and World Bank have issued warnings about the trend of government borrowing with concerns that it may lead to the country being over-leveraged, probably in a shorter time span than anticipated. So there is reason for national government to be concerned about the financial implications of the demands being made by doctors.

However, there are is a clear flaw in the case being made by government attempting to use finance and economics to deny doctors their requests. Just as the government seems stuck on chronic over-spending, it also seems stuck in chronic financial mismanagement. Kenyans will simply not believe that the government does not have enough money to meet doctors’ demands given the sheer volume of allegations of colossal corruption housed in national government bodies such as the Ministry of Devolution and Ministry of Health; allegations of graft in these bodies alone are estimated to stand at about KES 8.5 billion. Last year Member of Parliament (MPs) negotiated a deal that effectively made Parliament’s wage bill rise by more than KES 2 billion in a year.  Please note that by 2013 reports indicated that Kenyan legislators are the second-highest paid lawmakers in the world, beating their counterparts in USA, Britain and Japan. Ergo, the issue is not a lack of money, the issue is what priorities are absorbing public finances.

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(source: http://pathfindersrcd.org/wp-content/uploads/2016/05/spend-or-save-300×300.jpg)

Thus, while there are financial and economic implications to the demands being made by doctors, I fundamentally agree with their demands. This is not only because the country can only develop on the foundation of a healthy and productive population, fiscal policy is wanting. It is wanting not only in terms of fiscal mismanagement but also through the prioritisation of wages for some while failing to better equip hospitals and ensure the adequate compensation of doctors and other health staff.

Anzetse Were is a development economist; anzetsew@gmail.com

Devolution can give birth to issue-based politics in Kenya

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This article first appeared in my column in the Business Daily on January 15, 2017

As the election season begins to heat up with various aspirants vying for seats at national and county level, the electorate should begin to think about how to ensure to their issues and concerns are addressed by the next crop of leaders. As we all know, at national level, political alignments are defined by tribal groupings and affiliations. This formula of politicking is unlikely to change at national level, however this need not be the case at county level. Although in some cases, tribalism has been devolved to the county where there is a growing obsession with clan-based politics, such trends can be stopped and be replaced by issue-based politics.

Outside the major metropoles of Nairobi and Mombasa, relative tribal homogeneity dominates most of the other counties, especially rural counties. Ergo, in most cases, the direction of how that county will vote at national level will be informed by tribal political affiliations. However, for county posts the possibilities are more fluid as many of those who will be vying for office, particularly in rural areas, will be from the domicile tribe. This provides the opportunity for issue-based rather that tribe-based politics to dominate at county level. Devolution has provided an opportunity for the electorate to ensure that, at the local level, their issues, concerns and priorities take precedence over tribe or clan-based political jostling. It is at county level that Kenyans can make sure all aspirants talk about issues, rather than copying the tribe-based political back and forth dominant at national level. It is at county level that Kenyans can force aspirants to get off the ‘tribe’ pedestal and instead stand on the ‘issues’ pedestal.

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Now, as mentioned, in some parts of the country, devolution is leading to the devolution of tribalism. Some Kenyans are now voting, at county level, based on which clan different aspirants belong to. This is pure folly that dangerously mimics tribally aligned politicking at national level, the damage of which Kenya has seen in the past. Thus, the time is now for Kenyans at county level to insist on aspirants speaking to addressing issues rather than focussing on clan-based affiliations. Kenyans have a window of opportunity to make certain that the culture of selecting county leaders on issues takes root.

Indeed, once the election period is complete and the new administrations at national and county level have been selected, Kenyans can truly exert pressure at county level for the issues to be the focus of the incoming administrations. At national level, there will continue to be tribe-based political tensions, this need not be the case at county level. Kenyans must leverage the power that has been afforded them through devolution and organise themselves at county level into issue-focussed caucuses that pressure county leadership and technical executives to communicate how county issues will be addressed.

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Finally, devolution can enable issue-based fiscal policy formulation at county level. At the moment, budget making at county level is haphazard and disorganised defined more by personal agendas than county needs. Kenyans can follow the lead of Elegyo Marakwet county and devise budget formulas that prioritise county needs, not personal agendas. The Elgeyo Marakwet County’s Equitable Development Act 2015 creates a budget formula that distributes the county budget based on equality and equity. Such strategies ought to be encouraged in all counties as they are a first, crucial step to ensuring equity and equality inform county budget making and fiscal policy formulation.

In short, there is ample room for Kenyans to use the upcoming elections to ensure that their issues take precedence at county level. And in encouraging issue-based politics to take root at county level, such thinking may trickle up and direct national politicking to be focussed on issues, not tribe.

Anzetse Were is a development economist; anzestew@gmail.com

How corruption in exams distorts national economy

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This article first appeared in my weekly column with the Business Daily on January 8, 2017

Cabinet Secretary for Education, Matiang’i, stunned the country when he released the results of the Kenya Certificate of Secondary Education (KCSE) late last year. Only 141 As were earned compared to over 2500 in 2015. The pattern was similar in all other grade classes, with far fewer students earning the top grades when compared to previous years. Some schools that were top performers barely managed to garner top grades this year. While this has surely aggravated some schools, students, teachers and even parents, the importance of how Matiang’i supervised and structured the entire KCSE exam process should not be underestimated.

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Firstly, it seems clear the rot of dishonesty and cheating had overtaken the education system with ominous results; corruption had become a way of life in Kenya’s education system. When schools, teachers, students and parents all collude to cheat their way into earning top marks, the very core of the future of the country is compromised as cheating becomes an accepted way of life. Students witness adults devising schemes to cheat as normal. How then can a country expect to create a generation of honest, hardworking Kenyans when the young see such profound deviousness embodied by their elders? If anything, the dubious manner in which previous exams were conducted cemented the culture and essential acceptance of cheating and corruption in the minds of future generations.

Secondly, the culture of cheating was crippling the country; students were no longer interested in learning. An analyst made the point that the culture of cheating had eroded the importance of learning in the minds of millions of students. Many students saw no need to pay attention in class as they were assured of being leaked the final exam papers just before the exams. Consequently some saw no need to focus and absorb what they were being taught as they were assured of As regardless of whether they understood the content or not. This attitude then would follow students into further education, where again schemes were created to earn the top marks without having learnt the content required for the course. This has had serious consequences: firstly, transcripts presented to potential employers mispresented the students’ competencies and strengths. As a result, employers had no tool with which they could select the best and position them in relevant positions. Secondly, cheating meant many students entered the workforce as essentially incompetent as they had not truly learned the full body of knowledge expected of them. As a result, employers quickly realised that top marks account for nothing and thus had to spend millions more training job entrants in basic skills. This is a waste of millions of shillings that could have been better spent had honesty been the norm. Additionally, those who cheat their way through school bring with them a culture of eating where they have not planted, of reaping where they did not sow and of viewing corruption as a legitimate tool to use in professional life.

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Thirdly, cheating has a detrimental effects on economic development. If the country has a distorted means of assessing student performance, how can the country assess where the country stands in terms of the literacy and educational competence of the youth? How can the country determine subject and geographical areas that need special attention and strategy? Cheating in the education sectors makes it impossible for the country to develop relevant strategy to improve the education sector and better position the sector to be a catalyst for the development of the country.

Matiang’i and his team should be applauded for having the grit to take on the culture of corruption that had riddled the country’s education system. The next step should now be a thorough assessment of curricula to ensure that education at all levels equips the youth with relevant skills to earn a fruitful living and push the country’s development forward.

Anzetse Were is a development economist; anzetsew@gmail.com

Dynamics to look out for in 2017

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This article first appeared in my column with the Business Daily on January 1, 2017

As 2017 starts it is important to take note of key dynamics that will define the year in Kenya. Most of the dynamics will be related to the elections at both national and county levels. There are several issues married to this concern the first of which is political and civil stability. There are already signs that the race for office at both national and county levels will be intense with potential for unrest. It is important that all aspirants as well a security minimise any instability that may emerge from the elections to limit its potentially negative effects on the economy. Kenya’s election year tends to be associated with lower economic growth. It is time to break away from this by securing stability regardless of whether it is an election year or not. This can only be achieved if aspirants from both sides of the political divide are responsible in their speech and actions and are all committed to well governed elections.

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Secondly, there has been and will continue to be an intensification of tribalism associated with the elections. The problem with tribalism is not only that is it morally abhorrent, it is foolish. The folly of tribalism related to electing leaders is that is engenders a culture of unaccountability in leaders. Regardless of how the leaders of the ruling or oppositions parties behave and perform, they are guaranteed that Kenyans will vote for them depending on tribal bent. Thus leaders do not need to meet promises made, develop the country or be accountable because they know when elections come around, none of the aforementioned will affect their vote; only tribe will. Thus it is wonder that Kenyans complain about poor leadership yet it is the obsession with tribe in this country that feeds that culture of unaccountability in leadership. This year Kenyans should start the process of ending the culture of tribalism by demanding ideological positions from aspirants on how they will rule at national and county levels.

Another big dynamic will be fiscal policy and management. With regards to fiscal policy, the budget will be read in the middle of the year at the height of electioneering. It is important that Kenyans pay attention to fiscal policy to understand the financial plan for the country going forward. This is important as there may be a change of guard before the end of the fiscal year either at the political or technocratic level. Secondly, election year is a good time for Kenyans to ask hard questions on the management of public budgets. The issue of fiscal management or the lack thereof has beleaguered Kenya for the past five years both at national and county levels. The allegations of graft at national level have been well publicised yet those at county level are essentially ignored. This is a dangerous dualistic mind-set as continued graft at county level poses a clear and present danger to the ability of devolution to deliver on development. Counties in both ruling party and opposition dockets are culpable; this is a non-partisan issue. Therefore this year Kenyans should demand, at both national and county level, clear strategy by all aspirants on how they will address this issue of fiscal mismanagement. This should be coupled with an expectation from aspirants to devise prudent fiscal policy at national and county level.

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The final big issue is the development agenda for the next five years; what theme will define the next era of rule? It is clear that over the past five years, infrastructure has been a key theme for the government. Will this be continued for the next five years? My view is that there should now be a shift from infrastructure to manufacturing and green industrialisation. The share of manufacturing in GDP in Kenya has been stagnant for decades. As a result, Kenyans have not fully benefitted from the related job creation, rise in disposable income and penetration of Kenyan products in the African market. The time is now for the next administration to develop a clear strategy and plan for manufacturing and green industrialisation as the theme that will define the next five years.

Anzetse Were is a development economist; anzetsew@gmail.com