To reboot the economy, we must not focus on sectors at expense of others

On the Saturday of December 12, 2002, I was part of the sea of humanity that took over the entire of Eastlands from the airport, the Central Business District and Uhuru Park. There was an aura of change on the country’s top leadership.

The current president was the ruling party’s presidential candidate. The captain of the Opposition had been injured on a road accident days earlier and flown to the UK for specialised treatment. And he was returning home for the ballot that would end the 40-year-era of the independence party. At that time, nobody worried much that the captain was injured because around him was a robust team.

The climax of the day was a chaotic rally at Uhuru Park late into the evening. The import of my discussion today is from the speech of the then vice captain, the late Michael Kijana Wamalwa.

In his wisdom, he had captured the essence of the moment with these words: “For a great leader to realise his greatness, he must stand on the shoulders of other great leaders.”

This statement sums ups the workings of an economic system. The economic growth that we measure under the Gross Domestic Product (GDP) is a sum total of several independent variables interacting under the directive of top leadership in the country.

Extractive political institutions destroy the genius of economic forces to organise the national endowments, talents and the reward system to generate the desired economic outcomes.

Identify investments

In the eyes of the late Wamalwa, for an economy to redistribute the national wealth equitably, then policy and political leaders must not only focus on the parts of the economy but also their interactions as a whole. In the current regime, big infrastructure projects have been highlighted as the pillars of President Uhuru Kenyatta’s legacy. Unfortunately, a legacy is not something that you can do projects towards, but the outcome of several daily activities happening across all government sections and departments.

Empirical evidence on economic development identify investments in physical capital, human capital, technological progress, natural resources and property rights, and political stability as drivers of economic growth. On the other hand, government consumption spending, political and social instability, trade barriers and socialism reduce economic growth. If these are the drivers and inhibitors of growth, how then do we appraise the preoccupation with the legacy projects?

All sectors matter individually and collectively. Investments in physical capital include machinery, tools and building that enhance workers productivity. It is unacceptable that the economy is heavily reliant of subsistence farming using equipment of the agrarian era. This implies that the country has failed to leverage on modern productive capacities to exploit her labour force.

Human capital refers to the combination of education, health and other non-physical assets of the nation’s workers to enhance their productivity. Relevant education that impacts economic growth is both formal and informal. Formal education is measured through public spending to finance learning institutions and time students spend in formal schooling. There is a positive relation between the number of years students spend in school and the economic growth of a country.

The informal education is considered from the competencies that a country’s workforce acquires from the workplace. According to World Bank, Kenya’s spending on education as a ratio of the GDP was 3.93 per cent in 1971, 7.3 per cent in 2005 and 5.3 per cent in 2018. While this is higher than the sub-Saharan Africa average, the return on investments is lost with the higher levels of unemployment or underemployment.

The economy is heavily dependent on imports and predominantly informal that it misses out on the informal education economic benefits. On health, in 2018 Kenya spent a paltry 5.17 per cent of her GDP compared to the world average of 9.85 per cent. This would imply that in addition to the national disease burden, Kenya’s workforce productivity would be significantly compromised due to health-related complications.

The genius of technological progress is the return on investments in education and health. The knowledge acquired is meant to stir innovation and creativity among the population. Government spending in research and development is an important element in measuring a country’s ability to create and innovate.

Unfortunately, our public expenditure in research and development has remained below 0.8 per cent compared to an average of about four per cent by South Korea, one of the world’s highest investor in this variable. Technology transforms resources into improved final products. While there is no doubt that Kenya is well endowed with very many creative minds, our political institutions and national leadership have failed miserably to harness, coordinate, protect and commercialise these innovations.

It is the obligation of the government to establish an enabling environment to allow the most talented to thrive. Unfortunately, our political leadership promotes cronyism, mediocrity and a toxic business environment through punitive tax regimes and poorly thought out macroeconomic policies. In any case, it is economic hogwash to talk of huge infrastructural investments if they are not designed and built by our own engineers and designers, and majority of the supplies are not sourced from within the economy.

Guarantee protection

On natural resources, we have not been endowed with non-renewal resources. But we have plenty of renewable resources. The world has significantly shifted into Green Growth and Circular Economic models. This calls upon our policy makers to make a deliberate effort to integrate green energies into our building technologies. It demands that green energy should be our primary source at both industrial and household levels. Our waste management system must be turned into frontier industries of the 21st century. Relevant green technologies on waste management already exist.

On the final question of property rights and political stability we score probably three out of 10 at best. It is an open secret that it is difficult to trust the authenticity of government documents on properties. Citizens too have no shame copying and commercialising others’ innovations without rights. An economy whose leaders cannot assure the sanctity of property rights nor guarantee protection of innovations of its citizens is doomed ab initio. No investor or creator will want to put all their energy and soul into such a system.

With hindsight from models of effective economic structures, the late Michael Kijana Wamalwa had this in mind: That for the king to be great, then he must surround himself with fine and polished men and women in their own fields of expertise. That model of leadership abhors sycophancy and mediocrity not only in the politics of the day, but also in the management of the economy.

newsdesk@standardmedia.co.ke