Economy suffering as we fight over BBI

The economy is hurting. The most recent Markit Stanbic Bank Kenya Purchasing Manager’s Index (PMI) for manufacturing and services shows a decline from 49.7 in February to 49 in January.

Index values above 50 depict growth. In other words, the economy was bad in January, and got worse in February.

News reports suggest that the decline is not limited to wananchi on the lower end of the economic spectrum.

According to the Knight Frank Wealth Report, the number of dollar millionaires dropped by almost 15 percent since 2017. 

That the entire spectrum of the economy is in free fall should be a concern for the political class.

Instead of spending all their time and effort dancing on podiums at BBI rallies and hurling verbal abuses, politicians ought to be thinking about how to get the country out of an economic slowdown. 

At the lower end of the spectrum, Kenyan households are seeing declines in agricultural productivity, lack of jobs, rising cost of living, and general deterioration in the quality of public services.

In order to arrest the decline for this portion of the income ladder, the government should do all that is possible to stabilise the cost of living, invest in agricultural productivity (which has implications for the cost of food), enable the construction of more housing units in urban areas, improve service delivery in public schools and hospitals (which will reduce the need for private options), and support small and medium enterprises (which are the biggest job creators in the country). 

In short, government policy should meet Kenyans where they work and live. The starting point of transformational policy-making should not be “which rich country do we want to look like, and what mega infrastructure project should we invest in next?” Instead, it should be “how do most Kenyans earn a living, and how can we make them more productive at doing everything they do?”

Shortest time

The former approach has produced several white elephant projects and fueled corruption throughout our history, and especially over the last seven years under the Jubilee Administration.

The latter approach holds the promise of engineering an organic expansion of the economy in a way that would impact the most households in the shortest amount of time. 

At the higher end of the spectrum, the government should focus on businesses that are trying to scale sectors that touch the greatest number of Kenyans.

Devolved governments create opportunities for supporting the expansion of the private sector across the country. Legitimate firmsare providing all manner of services to counties.

Many, however, face collapse in the face of unpaid bending bills and generalised corruption. It is no wonder that the high end of the economic spectrum is also hurting. As a matter of policy, public spending should be designed to have the highest possible multiplier effect.

It is high time the government established a metric of quantifying the economic impact of every expenditure outlay, with the goal of supporting efficient private firms that interface with the public sector. Those firms create tens of thousands of jobs. And when they go under due to corruption and pending bills, the ripple effects affect the entire economy.  

The writer is an Assistant Professor at Georgetown University