Ruto's government has spending problem, income is way too much

It is fair to speculate that President William Ruto’s Kenya Kwanza administration might turn out to be our most disappointing since independence.

There is an everyday sense of chaos, disorder and uncertainty, meshed with everyday allegations around endless primitive accumulation, and flavoured with the hubris of blather, blarney and bluster with more oil than snake, and vice versa.

We don’t forget when KANU was described as an era of “socio-economic blunder and plunder.”

Allow me this impatient tone today because these guys should be doing far better. I will state here without any fear of contradiction that Kenya Kwanza had a great manifesto, “The Plan."

Importantly, it recognised three challenges translated as goals for Kenya.  Resilience to deal with the vagaries of the world’s difficult economic moment.  Discipline to address our local fiscal mess. And probably most importantly, a long awaited restructuring of the economy towards inclusion. 

Or, as I like to say about this last one, a “pro-markets” agenda with new consumers, to complement and not necessarily overturn, but reform our mostly cartelised “pro-business” state. Pro-business?  Well, yes, away from our crony capitalism built on financial, not human, capital. 

What the Bottom-Up Economic Transformation Agenda (BETA) promised was as much about renewal as it was about upheaval.  I will bet you my last shilling that others will pick up this idea, and implement it successfully.  A bit like how the Far East Tigers learnt from us in the 1960s. 

BETA required, and still requires, a proper leadership moment. In other words, a moment that knows the way, shows the way and goes the way.  Almost 23 months into this 60-month Kenya Kwanza administration, knowing the way looks like every brainwave is now stuck in court largely because Ruto and his team are unable to sell us an end-state picture of tomorrow, instead focusing on input-level communications: we are doing, we want to do, we will do promises, etc. 

When we get to show the way, “mta-do” (what will you do?) impunity seems to be this administration’s hallmark.  They publicly admit we have “industrial-scale corruption” while perfecting their own value chains of graft.  Lest we forget, perception is reality.  If you don’t know the way or show the way, how will you go the way? This is the question in the minds of Gen Z and others as August 8 approaches. 

This brings us to the Court of Appeal ruling that Finance Act 2023 (FA 23) is unconstitutional. That, essentially, we are now to operate with tax laws as last amended by Uhuru’s final Finance Act of 2022.  Beyond the comedic political irony here, and noting that an appeal has gone to the Supreme Court, there are a million and one angles to this ruling.  Incompetence is one thought that comes to mind, as does hubris, but let’s be fair today and consider five other angles. 

The first, as probably appealed, is the potential further tax revenue loss from deleting FA 23 effects from the government’s 2024/25 budget estimates. Of course, the data suggests that FA 23 terribly under-delivered in 2023/24 on account of a struggling economy, so it is a bit laughable that this appeal will claim significant loss from its removal from these 2024/25 revenue estimates. 

Relatedly, the second is that, for all practical purposes, we still do not have a 2024/25 budget. 

Put differently for effect, we will need Supplementary II budget estimates right now to deliver the original budget estimates that Supplementary I attempted to replace.  Remember, these are “ab initio” not “in-year” adjustments that need to be made because the fiscal year has barely begun. 

Which brings us to a third angle.  If we are back to Finance Act 2022, then it means the Kenya Kwanza administration has not started work two years into office.  Or, to be precise, BETA is not off the ground, or where it is, it’s still in court.  Every one of the five pillars has a court case right now, but the larger point is that this ruling puts the entire Kenya Kwanza agenda on trial. 

The fourth angle is probably the most telling.  Our leadership, from the Presidency to ministries to Parliament, simply refuses to understand what public participation means.  Here are three public participation ideas that might help.  Active civic contribution to decisions (policy and law, planning and budgeting).  Active civic participation from oversight to partnerships (execution and implementation).  Holding leaders to account (audit and evaluation).  It is not lipstick on a pig. 

So where does President Ruto and his Kenya Kwanza administration, now transformed (outside “The Plan”) into a broad-based government, go from here without FA 23 and Finance Bill 2024? 

The immediate impulse is to restore FA 2023 through a Supreme Court ruling.  Let’s just say that this will seriously test the will and judgment of those men and women in our current public mood.  Which suggests that the alternative approach might be to pursue piecemeal changes to our various tax laws as a sort of Miscellaneous Amendments Act (or Tax Laws Amendments Act) rather than a fully-fledged Finance Act.  This would be a valid, but rather sloppy, band-aid solution. 

Sloppy, of course, is a word that we could use to liberally depict the budget process under this administration.  It is all over the place, with willy-nilly, pork-barreled budget adjustments and endless fiscal jiggery-pokery between Treasury and Parliament.  Do we know what the final Supplementary I Appropriations Bill to be signed into law looks like?  Did we have a Parliamentary moment when Housing Fund cash was included as revenue to balance the books? 

There is a lesson for Ruto and his administration here. The simple one is to follow the Constitution.  The better one is to do it right first time.  Much Finance Bill angst would be alleviated with more transparent and predictable revenue estimates, a clear presentation to Parliament (and the public) of Finance Bill effects and a legalised submission of total, not just incremental, revenue estimates as we are happy and eager to do with spending appropriations. 

Probably, all supported by less macro-babble and more citizen-speak on our wider economic intentions as BETA, which is more than the budget.  Because the government is not the economy. 

But we must consider our fifth and final angle. At the end of the day, our leadership obsession with imposing higher taxes on us to pay our debt misses the entire point.  That government has an expenditure, not revenue, problem.  And citizens have an income, not spending, challenge.  We don’t need a circular flow of income diagram to get this. As Gen Zs say, how do we live within our means when we don’t have the means in the first place?