Who stands to reap the most as Adani tightens grip and economy flounders?

Adani group Chairman Gautam Adani speaks during the inauguration of the 9th Vibrant Gujarat Global Summit in Gandhinagar, India on Jan 18, 2019. [File, AP Photo]

In an interesting coincidence, the 2024 Nobel Prize in Economic Sciences was awarded to Daron Acemoglu, Simon Johnson, and James Robinson in the same week that key indicators showed ordinary Kenyans sinking deeper into poverty.

Announcing the winners on October 14, the Royal Swedish Academy of Sciences noted that, “Societies with poor rule of law and institutions that exploit the population do not generate growth or positive change. The laureates’ research helps us understand why.”

For context, Acemoglu and Robinson are renowned for their influential book Why Nations Fail: The Origins of Power, Prosperity, and Poverty. Acemoglu and Johnson’s most recent book, Power and Progress: Our 1,000-Year Struggle Over Technology and Prosperity, explores the history and economics of technological transformations, including today’s era of artificial intelligence.

But why should the research of this year’s Economic Nobel Prize winners matter to ordinary Kenyans?

This past week, mainstream and social media have highlighted the latest findings from the Central Bank Supervision Report, which revealed that only 1.14 per cent of all bank accounts in Kenya held deposits of at least Sh500,000. A comparative analysis of deposit distributions between 2022 and 2023 showed that the total number of accounts in both commercial banks and microfinance institutions grew from approximately 67.1 million to 97.9 million, marking a 46 per cent increase.

Despite this rise in account numbers, accounts with deposits of at least Sh500,000 decreased from 1.87 million in December 2022 to 1.12 million in December 2023, representing 2.79 per cent and 1.14 per cent of total accounts, respectively. This data does not distinguish between corporate and individual accounts, but if we were to isolate corporate accounts, the financial outlook for households and individuals would likely appear even bleaker.

This data is supported by evidence from other economic subsectors. Reports from the motor industry indicate that sales of new vehicles declined by 8.58 per cent in the first nine months of 2024. For second-hand vehicles, the 2024 Economic Survey reports that imports dropped by 11 per cent in 2023, down to 78,127 units from 87,648 units in 2022. Even among units sold, consumer preferences have shifted toward smaller and cheaper car models. For obvious reasons, this column will not delve into the specific brands currently gaining popularity among consumers.

During the peak of the 2022 campaigns, Kenya Kwanza elites pledged that their government would prioritize the needs of ‘boda-bodas’ and ‘mama mbogas’. So, how have these sectors fared under their two-year tenure?

In the boda-boda subsector, data indicates significant losses for operators. Fred Obura, writing in the kenyanwallstreet.com and referencing Car & General’s motorcycle sales data, noted in an August 23 report that trading operations in the motorcycle sector have seen a 77 per cent drop, with average sales declining from 20,000 units to just 4,000 units currently.

While specific disaggregated data for mama-mbogas is hard to find, casual conversations with Uber drivers or boda-boda operators reveal how dire conditions are for those at the base of the economic pyramid. This situation also hints at a decline in middle-class spending power, which would typically drive demand for taxi services and retail sales.

These statistics point to a widespread collapse in economic activity affecting both the poor and the middle class, with no signs of relief on the horizon. This week, the courts removed the last hurdle to fully implementing the housing levy tax, dashing any hope for reprieve among workers frustrated by the levy. Additionally, with the month coming to an end, employees are bracing for the reality of the social health levy, which will deduct another 2.75 per cent from their gross pay.

Policy missteps

Reflecting on the economic policies of the past 25 months under the Kenya Kwanza administration, it’s hard to ignore the sense that these developments are deliberate, rather than unintended policy missteps. We must now ask ourselves: did we misunderstand their bottom-up economic philosophy, interpreting it to fit our tribal political interests, when in reality, it was intended to turn Kenya into a ‘hustlers’ nation’? Did we fail to question what ‘The Plan’ truly was when President William Ruto traversed the country, declaring he had one?

Looking back at the months leading up to the Gen-Z protests, the president and his administration often pushed their agenda onto the public, regardless of taxpayer opposition. Following the Gen-Z unrest, the KK administration has forged new alliances with the Orange Democratic Movement (ODM) to continue policies that many view as exploitative of the poor.

Then there’s the controversy surrounding the Adani Group, with the President recently expressing unwavering support for the company’s involvement in critical and strategic infrastructure projects in energy, health, and transport—echoing similar sentiments expressed days earlier by Raila Odinga, his new political ally.

Is it just a coincidence that top political elites in the country are now openly defending covert, multibillion-shilling infrastructure contracts with the Adani Group? This is despite clear signs that the company’s owners are currently facing corruption allegations, both in their home country and in other nations where they have secured similar contracts.

Strategic assets

In defense of the Adani deals, the President argues that using private capital for public infrastructure is preferable to raising taxes or increasing public debt. The irony, however, is that Adani is essentially granted taxpayer funds to carry out these projects or, in some cases, given unrestricted access to strategic public assets to use as collateral to secure loans for these same projects.

Take, for example, the Social Health Insurance Fund levy—isn’t this effectively our taxes being funnelled directly to Adani’s owners and their local partners? With the Ketraco power transmission lines, the revenue Adani is expected to generate in return for their declared Sh95 billion investment already appears to be covered by existing levies in our electricity bills. As for the proposed airport deal, while specific details remain unclear, all indications suggest that Adani will have exclusive control over all existing airport fees for the next 30 years while being shielded from any direct accountability to local oversight institutions or taxpayers.

This scenario resonates with the economic insights of Acemoglu, Johnson, and Robinson. At one extreme, the poor are being systematically pushed deeper into poverty; at the other, political and bureaucratic elites seem to be consolidating power to exploit public resources.

Reflecting on the dramatic events around Deputy President Rigathi Gachagua’s impeachment proceedings, it becomes evident how fiercely this elite group can act to protect their interests and maintain their exclusive club.

For now, questions linger that we may never fully answer: why Adani, and who really is Adani?