County leaders the cause of declining investment allure

Devolution Cabinet Secretary (CS) Mwangi Kiunjuri. [Photo: Courtesy]

Political grandstanding must stop if the political class has to deliver development. In particular, I want to address county governments, which have been hiding behind the reprise “the national government has not sent us money”.

Yet the county governments have numerous avenues through which they can raise local revenue and finance their services. A study by the African Development Bank revealed that current revenue collection by county governments stands at 18 per cent of their potential.

This means county governments have failed in the simple task of revenue assurance by not sealing leaks and enhancing revenue lines to achieve higher compliance.

The effect of this is that county governments are unable to build a sustainable environment for investment, both local and foreign. Blame this on cheap political grandstanding.

Last week, Italian billionaire Flavio Briatore, who has invested heavily in the tourism sector in Malindi, Kilifi County, threatened to withdraw his investments in the town owing to a poor business environment.

He complained about the dirt, poor road infrastructure and below-par county public service response. Such a lethargic environment can only turn away investors. He put the blame squarely on the county government.

Held trophy

The other example is Mombasa County, which has held the trophy - unchallenged for five years - for uncollected garbage and wanton drug trafficking.

Recently, the O’nyong’nyong virus outbreak has revealed the state of the county’s public healthcare system. This sends a signal to investors who may want an innocuous destination for their funds.

It is ironical that the secession debate has been championed by leaders from these areas.

The country has often been treated to comical manifestations of the martyr complex by these county leaders, yet their backyards are decadent with the odour of dismal performance.

The effects of these political manoeuvrings and abracadabra are apparent, going by the two major indicators of the investment barometer - diaspora remittances and foreign direct investment.

The World Bank has predicted a slower growth in diaspora remittances to Kenya transitioning from 2017 to 2018.

Over the last five years, diaspora remittances have posted an annual growth rate of between 8 and 10 per cent, but this is expected to drop to 4 per cent.

It is worth noting that the same report indicates that remittances to other African countries will perform better. Inflows to sub-Saharan Africa will grow by an average 10 per cent, with Nigeria leading the pack with 11 per cent growth.

Worrying trend

This is a worrying trend and the perpetrators of high-voltage politics are squarely to blame. The other indicator is the foreign direct investment.

Data from the United Nations Conference on Trade and Development shows that Kenya was on the small list of three countries that attracted less Foreign Direct Investment (FDI) inflows in 2016 compared to the previous year.

The report shows that FDI inflows to Kenya dropped 36 per cent to Sh40.7 billion ($394 million) even as inflows to East Africa rose 13 per cent. The reality on the ground is that investment flows to other East African economies have continued to grow as Kenya suffers a decline.

While the national government has made commendable efforts to brand Kenya as a favourite destination for investments, county governments must reciprocate to ensure that they have a hospitable environment for investment.

If politicians put equal effort into improving the circumstances of their respective regions as favourable destinations for investment, we would not score so poorly in diaspora remittances, foreign direct investment or other indicators that speak of the attractiveness of a nation as an investment destination.

When investors hear threats of secession, and encounter embarrassing diseases and garbage heaps because of indolent county leadership, they are bound to rethink their decisions.

History will judge these characters harshly, and they will be chronicled as enemies of the state.

 

Mr Karugu is a management consultant, strategy and [email protected]