Month: April 2017

How counties can attract smart investment

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This article first appeared in my weekly column with the Business Daily on April 16, 2017

The decentralisation of Kenya ushered in the county structure giving county governments power that was previously unavailable at that level. Sadly what seems to emerging is a focus by county governments is a focus on revenue generation through the imposition of new fees and levies on the private sector. This is arguably one of the most intellectually lazy means of generating income. In some ways it can be argued that the imposition of CESS, advertising fees and myriad of other fees is actually killing the business environment and the ability of private sector to generate jobs and money. So what short, mid and long term, can counties can deploy to attract the right type of investment and generate revenue?

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(source:www.montefeselfstorage.com/wp-content/uploads/2015/06/French-Investments.jpg)

An important action that can be done immediately is to determine the competitive advantage of counties. Within the County Integrated Development Plan (CIDPs), counties should articulate their competitive advantage, and strategies aimed at capitalizing on these in a manner that makes them profit and job generators. Further, it is crucial that important county leaders are identified. These include both those who live in the county as well as those with an attachment to the county. These leaders should be identified from all levels and include leaders in the private and public sectors, NGO leaders, village elders, women leaders, youth leaders as well as leaders from the disabled community. This county leadership should be consulted to develop an investment strategy in order to, among other things, identify county needs (health, education, infrastructure etc.), identify projects related to meeting these needs that are viable, identify sources of funding, develop the capacity required to raise the funds and source the skilled individuals needed to manage and implement the county projects.

In the mid-term, counties need to make an effort to make the county attractive for investment to both foreign and local investors. This includes reducing administrative and regulatory costs of doing business in the county, creating clear implementable strategies for ensuring stability and security, developing robust education and health structures and being seen to be visibly addressing corruption through the development of transparent county level public financial systems. Additionally, counties should participate in the Sub National Ease of Doing Business Index by the International Finance Corporation to determine how competitive their counties truly are.

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(source: https://anzetsewere.files.wordpress.com/2016/10/89a66-small-business-in-kenya-invest-africa-businesses.jpg)

In the mid to long term the county can make efforts to develop Public Private Partnership mechanisms to pull in the private sector to address county population needs. County governments should also clearly define accessible career pathways for the current and future skill needs of the county so as to identify those who are already well suited for key activities in the county in order to catalyse economic activity.

In the long term, counties should consider the development of an investment fund where some revenue can gain interest. This can be divided into short, medium and long term strategies that include deposits, treasury bills, treasury and corporate bonds as well as strategic equities with the ultimate aim of creating a county ‘sovereign wealth fund’. Through these strategies, county governments can build capital in a sagacious manner.

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

 

Use Public Private Partnerships to reduce debt burden

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This article first appeared in my column with the Business Daily on April 9, 2017

When the budget was read two weeks ago, one of the key questions that kept coming us was the issue of growing public debt in Kenya.  In the 2017/18 National Budget, the Kenya government plans to borrow KES 524.6 billion (6 percent of GDP).

Views differ on whether Kenya’s debt is sustainable. Some are of the view that given the massive gaps in key sectors such as energy and transport infrastructure, the country must continue to do everything possible to finance and address the gaps and that debt accrued now will pay off in the long term. Further, they argue that at a debt-to-GDP ratio of about 53 percent, Kenya is still well below the World Bank ceiling (or tipping point) of 64 percent. And while the IMF has raised concerns about Kenya’s public debt, it is below what they view as the applicable ceiling for Kenya at a 74 percent debt-to-GDP ratio. Others are of the view that a debt-to-GDP ratio beyond 40 percent for developing and emerging economies is dangerous. Further, at about 53 percent, the debt-to-GDP ratio is above the government’s preferred ceiling of 45 percent raising questions as to why this ceiling is being openly flouted.

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(source: http://www.worldbank.org/content/dam/Worldbank/Feature Story/Debt/Debt_Ladder-400X269)

Beyond the number crunching on debt figures, the broader concern for the country is that the substantial investment requirements for the country cannot be met by debt alone. This is where Public Private Partnerships (PPPs) come in. PPP refers to a contractual arrangement between a public agency and a private sector entity in which the skills and assets of each sector are shared in delivering a service or facility for the use of the general public. In short, government teams up with private sector to finance, manage and operate projects that are for public use.

There are numerous forms of PPPs ranging from projects where government owns the project and private sector operates and manages daily operations, to where private sector designs, builds, and operates projects for a limited time after which the facility is transferred to government. As the Africa Development Bank points out, PPPs are a useful means through which investment in development can continue in the context of growing pressures on government budgets. But as the World Bank points out, for PPPs to work the private sector needs political stability, a pipeline of bankable projects, transparent and efficient procurement, risk sharing with the public sector and certainty of the envisaged future cash flows.

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(source: http://www.neoias.com/index.php/neoias-current-affairs/617-public-private-partnership)

The good news is that the Kenyan government seems to be aware of the importance of PPPs at both national and county level. Numerous county governments are working with development partners to build their PPP capacity as well as identify viable county-level PPP projects. At national level, the government seeks to lock in investment through PPPs worth about USD 5 billion between 2017 and 2020. This will be important in managing the growth of public debt in the medium and long term. Through the intelligent use of PPPs, government can put the country on the path of sustainable development financing.

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

TV Panel Interview: Analysis of the Kenya National 2017/18 Budget

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Wallace Kantai engages Anzetse Were- Economist and Business Daily columnist, Dennis Kabaara- Business Daily columnist, Peter Karimi- CEO mCHEZA, Phyllis Wakiaga- CEO KAM, Ashif Kassam- Executive Chairman RSM, Sachan Benawra- Consulting Manager RSM in debating the pros and cons of the 2017/2018 Kenya Budget.

The Importance of Shadowing in African Political Accountability

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This article first appeared in my weekly column with the Business Daily on April 2, 2017

A Shadow Cabinet consists of a senior group of opposition spokespeople who, under the leadership of the Leader of the Opposition, form an alternative cabinet to that of the government, and whose members shadow or mark each individual member of the Cabinet. There is much use for the concept of Shadow Cabinets in the context of Africa’s political and economic development.

If every member of the Cabinet in ruling administrations in Kenya and Africa in general, knew they had an individual or team of qualified professionals scrutinising their policy, strategy and actions in their respective ministries two developments would likely occur. Firstly, the scrutiny would make cabinets more thoughtful and effective in policy and strategy development and implementation as cabinets would know all official communication and activity would engender an informed response and critique. If Shadow Cabinets were created in a context where Shadow roles were taken seriously, government would know that vague, incomplete or inaccurate information as well as inadequately thought through strategies would meet credible resistance. Secondly, the actions of Shadow Cabinets would give the general electorate a sense of how the Opposition would govern if they were in power. The track record of Shadow Cabinet critiques would present citizens with a clearer idea of how Opposition would address key challenges in the country. Image result for cabinet government

(source: http://media.dods.co.uk)

In Kenya the concept of a Shadow Cabinet is particularly important because political parties are not drawn along ideological lines. Unlike other parts of the world, political parties in this country are drawn along personalities and tribal lines. Further, political parties always realign and change composition in each election period, changing the dynamic of the leadership in the parties. As a result, in Kenya it is very difficult to know how an Opposition government would govern the country. I have long wanted to read Shadow Budgets as well as Shadow Policies on Agriculture, Education, Health and Finance for example. What would fiscal and monetary policy look like in an Opposition government? How would an Opposition government have handled the teachers’ and doctors’ strikes? How would Opposition address corruption if they were in government? These are all valid questions.

The frustration I have as a Kenyan is that I often do not know how governments will govern until they get into power. While Party Manifestos are produced every election year, they do not form a solid and consistence basis of engagement for analysis. Further, it seems Manifestos are political tools used during electioneering that are swiftly forgotten once elections are completed.

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(source: https://www.tutorialspoint.com/indian_economy/images/government_budget)

The time has come for Africans to demand Shadow Cabinets. In doing so citizen interests will be protected through the application of clearly thought out and consistent pressure applied on governments enhancing political and financial accountability. Further, the political landscape in Africa would stabilise as it would no longer be a guessing game as to how an incoming administration would rule the country.

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