Politics

TV Interview: Kenya’s Debt Question

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On November 12, 2017 I was part of a TV Panel with the CEO of the Kenya Association of Manufacturers, Phyllis Wakiaga and Alex Awiti from the Aga Khan University analysing the effect of the elections on the Kenyan economy and rising public debt.

 

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County Governments are not accountable to Kenyans

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This article first appeared in my weekly column in the Business Daily on October 1, 2017

Last week the International Budget Partnership Kenya (IBPK) released the results of an assessment on county budget reporting for all 47 counties for the financial years 2016/17 and 2017/18.  They found that counties are not making key fiscal and budget-related documents available to the public online in a timely fashion. As a result, citizens cannot participate effectively in the budget process as intended under the constitution and Public Finance Management Act (PFMA).

 There some troubling findings the first of which is that counties are still not making key documents available to the public online. With regards to the Annual Development Plans which are a main anchor to budgets, as of the second week of September 2017, just 22 counties had published their 2017/18 Annual Development Plans online; that is less than half of the 47 counties. In terms of the 2016/17 Quarterly Implementation Reports which detail budget implementation performance during the year, only Baringo county had published its Budget Implementation Report for the third quarter of 2016/17. With regards to 2017/18 Budget Estimates which detail program and item level decisions, only 15 counties had made the document available. Finally, with regards to the 2017/18 County Fiscal Strategy Papers which is the most important budget formulation document that sets total budget size, sector ceilings and key priorities, only 21 counties had published this online.

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(source: http://www.fortyfort.org/images/Budget.jpg)

Overall, the IBPK assessment found that only about 20 percent of key budget documents that were supposed to be online were available. To make matters worse, four counties (Garissa, Mandera, Migori and Turkana) have never published any document analysed during the assessment. The star performer however is Baringo County which has consistently been the most accountable across all documents studied in the assessment.

The findings above make one reality clear; there is a consistent pattern of low fiscal transparency across most counties. There are several factors at work that creating this troubling picture.

The first is that counties do not feel moved to adhere to PFMA stipulations and account for how they plan for and execute county budgets. There is a distinct air of mischief informing this laxity. It is not a secret that the first era of devolution revealed how much autonomy county governments have in the planning and use of funds they receive and generate. In the past, it seems that the poor reporting may have been due to lack of capacity at county level. While this may be true in some cases, Baringo county makes it clear that counties can develop the capacity if they have the will to do so. Ergo, this lack of transparency seems to be aimed at facilitating a culture of financial mismanagement and corruption at county level, in an environment where, frankly, no one is holding them accountable.

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(source: https://upload.wikimedia.org/wikipedia/commons/thumb/4/4b/Baringo_County_in_Kenya.svg/250px-Baringo_County_in_Kenya.svg.png)

This leads to the second point, county governments know they can get away with failing to account for funds because there are no consequences to poor performance. County governments know that National government will still deploy funds the next year irrespective of whether they comply with the PFMA or not. With no consequences for poor fiscal performance and reporting, financial mismanagement and corruption at county level can and probably are running rife.  The basic question is: who is responsible for keeping county governments accountable?

The way forward is for citizens in each county to demand financial accountability from county governments. This is because it is county citizens to whom county governments are accountable and it is county citizens who can vote out county governments.

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

Intellectual dishonesty is killing Kenya

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

Over the past year, a troubling trend has emerged; the use of intellectual arguments to present a one-dimensional analysis of complex issues in order to either generate support for or discredit certain political positions. It has become clear that many analysts and public intellectuals are using their knowledge base and expertise in a spirit of intellectual dishonesty.

The truth is that any topic being discussed has several dimensions to it. It is my view that it is the role of expert analysts and public intellectuals is to provide comprehensive, rigorous and apolitical analysis of issues so that Kenyans get a robust sense of the factors being discussed and the complexities therein. Thereafter, Kenyans can reach an informed conclusion. For the most part, this does not seem to be happening. What is happening instead is public intellectuals and analysts deliberately creating incomplete analysis and narratives that service certain political agendas. This is problematic for two reasons.

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First is the moral issue of intellectual dishonesty. All arguments have information that can both support or challenge a narrative. There is no single issue, especially when it comes to the political and economic reality of Kenya and Africa in general, that can have a single narrative and line of argument. Honest intellectuals will present both sides of a given argument and then state that they support a certain side because of certain merits. Instead what some public intellectuals seem to be doing is taking a given, one-dimensional political position and creating incomplete analysis to either support or discredit certain political agendas. This is creating immoral intellectual posturing where experts know they are not giving comprehensive analysis because they have a political agenda in mind. This is the height of intellectual dishonesty and goes against the spirit of robust intellectual exercise and practise.

Second is the issue of misinformation. The truth is that most Kenyans are often not aware of the layers of complexities of issues when analysis is given from certain technical backgrounds. As an economist I have the privilege of having a knowledge base where I can point out the holes in economic arguments. Most Kenyans do not have this privilege. Thus, in analysts and experts knowingly providing incomplete analysis, they are actually in the business of misinformation because Kenyans will be of the view that that the expert’s one-dimensional analysis is the only or best way to interpret a given issue. I am not suggesting that analysts and public intellectuals should not have certain positions, they should. The problem is that many do not point out counterarguments to their position and thus lead Kenyans down the road of incomplete analysis and misinformation. Thus, rather than analysts contributing to a culture of intellectual rigour and knowledge creation, they are contributing to a culture of intellectual deception and misinformation.

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(source: https://goinggentleintothatgoodnight.files.wordpress.com/2013/11/lies-deception-dishonesty-fictions-alzheimers-disease-dementia.jpg)

When knowledge and intelligence are used to beget bigotry rather than challenge it, what happens is that the nation creates a habit where narratives are not questioned and blanket statements are taken as the gospel truth. Intellectually dishonesty begets intellectual laziness where arguments are not interrogated but rather taken as fact. This should not be encouraged. It is time Kenyan analysts and public intellectuals took a long, hard look at their behaviour and decide who it is they serve. Are they using their knowledge to serve Kenyans or politicians? The answer to this question will determine the nature of intellectual discourse in this country and for which Kenya will be known.

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

TV Interview: Blow to business due to the election season

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On September 20, 2017 I was interviewed by the China Global Television Network (CGTN) on the effect of the nullification of Kenya’s presidential election on the economy.

TV Interview: Impact of an extended election season on the economy

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On September 20, 2017, I was part of a panel on Citizen TV discussing the impact of the extended election season on the Kenyan economy.

 

Systemic fiscal weaknesses need to be urgently addressed

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This article first appeared in my weekly column with the Business Daily on June 25, 2017

Last week the International Budget Partnership (IBP) presented information on what is driving fiscal performance at national and county level, with a focus on revenue inflows. This is a behemoth task in itself due to significant data gaps that impede comprehensive analysis. For example, gazettes released by the National Treasury tend to be incomplete and it is not clear when the disbursements actually happen. Additionally, figures frequently change (particularly revenue inflows) mid-year with no explanations and the same information can be presented in numerous formats making analysis on consistent data sets difficult.

That said, there is enough data from FY 2011/12 to 2016/17 to make some important observations. The first challenge that has emerged has to do with the sequencing of revenue inflows into National Treasury that affects county budget disbursements. National Treasury does not receive all of the revenue required to be dispensed over the fiscal year in equal tranches; that is 4 sets of 25 percent of revenue each quarter over the fiscal year.

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According to data over the time period analysed, in Q1 only about 20 (not 25) percent of total revenue in-flows have been received, this goes up to 47 percent by mid-year. What this means is that the bulk of financing for the fiscal year is received in the second half; as a result national government disbursement to counties follow a similar pattern where the bulk of county finances are sent in the later half of the year. This may explain complaints by governors that they do not get their disbursements on time and they blame Treasury for this.  But to be fair, National Treasury is not in full control of when revenue inflows come in. Nonetheless, since it is clear that this is a systemic issue that recurs, national government ought to start taking remedial action so that county governments are not affected by their revenue inflow constraints.

However, county governments are not innocent bystanders when it comes to fiscal weaknesses; counties almost consistently fail to approve their budgets on time and thus do not submit the attendant requisitions that lead to allocations. It seems that in most cases, county budgets have not been approved by the June 30 deadline; this leads to delays in disbursements. The factors behind these delays at county level are not clear but seem to be an amalgam of county capacity constraints as well as disagreements between County Executives and County Assemblies on what should feature in county budgets.Image result for fiscal policy

(source:https://www.proprofs.com/quiz-school/topic_images/p1aclsjbd41ijh1l7t1i071j3ckog3.jpg)

A third factor at play that is informing fiscal performance is to do with sources of revenue. We know that county governments are still very poor at generating their own revenue and thus are almost entirely reliant on national government allocations. This makes them less autonomous in controlling their fiscal performance. At national level, the issue is that government is being increasingly affected by delays in revenue inflows partly because taxes are making a decreasing share of national government revenue inflows. National government is becoming more reliant on other sources of revenue beyond taxes, which means more borrowing and government often does not control when those disbursements are received. So at both county and national level, government is not in full control of revenue inflows which leaves the country exposed to cash crunches on which quick remedial action cannot be taken.

It is important that national and county government develop revenue inflow strategies that mitigate current challenges so that expenditure and development plans can be more efficiently effected.

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

 

How Kenya can industrialise in 5 years

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This article first appeared in my weekly column with the Business Daily on June 18, 2017

Manufacturing can play a crucial role in Kenya’s inclusive growth by absorbing large numbers of workers, creating jobs indirectly through forward and backward linkages to agriculture, raising exports and transforming the economy through technological innovation.

It is with this in mind that the Overseas Development Institute and the Kenya Association of Manufacturers coordinated a multi-stakeholder process to determine how the manufacturing sector can create 300,000 jobs and increase the share of manufacturing in GDP to 15 percent in 5 years.

A plan titled ‘10 policy priorities for transforming manufacturing and creating jobs’, has been developed focused on key actions that can be taken to build the manufacturing sector and achieve the aforementioned goals. The plan is rooted in the Kenya Industrial Transformation Programme and the Vision 2030 Manufacturing Agenda targeted at priority sectors of both formal and informal manufacturers (jua kali) as both sectors need support if Kenya is to industrialise equitably.

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(source: http://www.industrialization.go.ke/images/kenya_manufacturing.jpg)

The first issue to address is the business environment in Kenya. While Kenya has moved up 21 places, in its position World Bank’s Ease of Doing Business Rank, considerable constraints exist particularly in dealing with construction permits, paying taxes and registering property. Thus further action is needed to improve the business environment. Additionally, for manufacturing to flourish the country needs a fiscal regime that is more articulated to support the sector. Fiscal policy at both national and county level needs to be more deliberately leveraged to support industrialisation through, for example, developing fiscal incentives that drive investment into manufacturing.

The third action point concerns making land more accessible and affordable. Research by Hass Consult reveals that the price of land in and around Nairobi has increased by a factor of 6.11 to 8.05 since 2007. Aggressive increases in land price dampen investor appetite for investment in manufacturing which tends to be land intense. Thus there is a need to prevent inflationary speculation on land prices, and develop government land banks earmarked for industry.

Energy costs continue to be punitive in the country and make Kenya’s manufacturing sector less competitive than even its East African neighbours. Government efforts need to not only target increasing energy generation but also lower energy prices and increase the quality and consistency of energy to the industrial sector. This should be coupled with a key gap constraining the sector- access to finance. Manufacturing companies, particularly SMEs and informal industry, are undercapitalised and face multiple obstacles to obtaining access to finance. Bespoke financing mechanisms aimed at the sector, such as through an Industrial Development Fund, need to be fast-tracked.

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(source: https://newsghana.com.gh/wp-content/uploads/2015/01/wpid-manufacturing150115.jpg)

Kenya cannot leverage manufacturing for economic development without creating a more aggressive export push into regional and international markets. Kenya’s exports to the EAC are declining and opportunities such as AGOA can be tapped into more effectively. Additionally, Kenya needs to reorient education policy and skills development towards STEM subjects so that the skills in the labour pool drive the growth of manufacturing.

Finally, overall coordination in the sector is crucial. An agency in government should be created that coordinates all government entities relevant to industrialisation such as agriculture, education and the National Treasury. The private sector also needs to better coordinate particularly along value chains to drive sub-sector growth in a more robust and targeted manner. Finally, there is a need for better coordination between public and private sector through fostering trust and reciprocity to drive industrialisation forward.

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