Month: March 2018
I was on CGTN discussing the decision of the Monetary Policy Committee to reduce the Central Bank Rate, in the context of an interest rate cap.
In this CGTN interview I highlight the implications of the Two Sessions, China’s most important political gathering, for Africa.
This article first appeared in my weekly column with the Business Daily on March 11, 2018
Last week I attended the Innovation Summit organised by The Economist magazine. The event was focused on digital transformation for accelerated growth in Africa. There are several points I want to share concerning the interface between the public and private sector, and innovation.
With regards to the private sector, an interesting point raised is that innovation targeting private sector must have a business case for adoption otherwise the innovation won’t be absorbed. Innovation must demonstrate that the short term inconvenience of adoption will pay off in the long term. Private sector is skeptical of ‘model changes’ and any model claiming innovation must be clear on the value it will deliver. So innovation must provide a proof of concept before it can be adopted and scaled.
Secondly, the lack of data in Africa means we don’t know what the real situation is on the continent but more importantly it means that the data that we do have is over weighted and given extra significance that it not necessarily merited. We have a real problem with information asymmetry and data bias. Data is the core of innovation so Africa must solve this problem if we are to make informed strategic decisions.
Thirdly, private sector must deal with the fact that the lack of data on the continent impedes the absorption and spread of innovation because strategies for market penetration and sharing cannot be rolled because the lack of data means private sector is often going in blind. Private sector often doesn’t know where the market sits. So private sector innovation may have created a valid solution, but the lack of data makes penetration and scaling very difficult.
Additionally, public sector needs to know that rent seeking and corruption cancel the benefits that could have been accrued by innovation. Africa cannot fully leverage innovation with strong networks of corruption in place. As long as government engages in corruption, Africa will not fully leverage the benefits of innovation.
That said, sometimes innovation from private sector is not quickly adopted by government which frustrates private sector. Slow adoption by government is often because government is obligated to ensure the innovation does no harm, a factor that may not feature strongly in the private sector lens. Indeed, sometimes government policy is so stringent that it stifles innovation. But the question is, how can government policy be structured to foster innovation while ensuring the innovation won’t inadvertently do public harm?
Another point of concern is what Africa needs to have in place to leverage innovation. How can Africa fully leverage innovation if basics are not taken care of? Sure we can leapfrog things like telephone lines but innovation will be crippled if issues such as infrastructure are not addressed. Some basics have to be in place for innovation to really work.
Finally, often innovation in Africa is rooted in the lack of key services by government. Private sector innovation is often rooted in developing a solution that plugs the gap that government services should fill. So what’s the way forward? Does government enable private sector to go on with the innovation or does government adopt the innovation and take over? What are the cost implications? Is there a mandate problem?
Anzetse Were is development economist; firstname.lastname@example.org
On March 4, I was part of a TV panel discussing the state of unemployment in Kenya, the concerns, dynamics and recommendations on the way forward.
This article first appeared in my weekly column with the Business Daily on March 4, 2018
The Cabinet Secretary of Treasury, Henry Rotich, it putting together the budget for 2018/19, the first in the second era of devolution, being developed in a context where a second Eurobond has been issued and there is growing concern about the sustainability of Kenya’s debt. This is also the first budget in the second and last term for President Kenyatta and thus can give an insight into the type of fiscal legacy the president intends to leave. Fiscal policy over Kenyatta’s first term has been defined by three main features. The first is subpar revenue generation; while revenue generation has been growing, revenue targets are often not met, and revenue is not growing at a rate that can effectively fund expenditure. The second feature is aggressive growth in expenditure where the 2018/19 budget looks to be about KES 2.5 trillion, up from KES 1.6 trillion in 2013/14. This has led to the final feature of fiscal policy which is an expanding appetite for debt. Rotich has three main options for fiscal policy the 2018/19 financial year.
Firstly, the budget can be more or less what has been done in the past. And if one looks at the February 2018 Budget Policy Statement (BPS), it seems as though this year’s budget will be more of the same. Allocations to dockets are within similar ranges as in the past, expenditure has grown aggressively and the aggressive appetite for debt continues. Should Rotich choose to stick to this fiscal path, concerns over the country debt growth will continue to be voiced as it is precisely this fiscal path that has gotten Kenya to the stage at which we are now.
Secondly however, Rotich can change tact and truly implement aggressive austerity measures in the context of fiscal consolidation where concrete policies are created to reduce government deficits and debt accumulation and results tracked. Several bodies have called for fiscal consolidation and thus it would be prudent for the Treasury to heed that call. The concern with previous budgets is that Treasury asserts that austerity measures will be implemented and spending cut, but budget implementation indicates that this does not actually happen. Rotich has a chance to make significant cuts in unnecessary spending, enforce fiscal discipline, allocate more money to development spending and implement measures to ensure development funds are absorbed.
The final path is one where Rotich puts significant funds into President Kenyatta’s Big Four and uses expenditure to finance the sectors of health, industrialisation, housing and agriculture in order to catalyse economic growth, create jobs and reduce poverty. Rotich can present the argument that prudent and disciplined spending targeting the four dockets will put Kenya on a growth path where the country hits the Vision 2030 growth rate of 10 percent. Sadly, however, there is no indication of notable fiscal support to the Big Four in the February BPS. There is a section dedicated to the Big Four in the BPS but if one takes a close look at allocations, one finds no difference in allocation patterns that would indicate that the fiscal process is focused on the Big Four.
In short, the budget for 2018/19 will set the tone of fiscal policy making for the next four years and let Kenyans and the world know, the extent to which government will leverage fiscal policy to put the country on a dynamic growth path that is fiscally sustainable and catalytic.
Anzetse Were is a development economist; email@example.com