Trial or error? Why Rutonomics falls short of Kenyans' expectations

 

Anti Finance Bill 2024 demonstrations along City Hall Way, Nairobi on June 24, 2024. [Elvis Ogina, Standard]

President William Ruto is marking two years since he assumed the presidency at the ‘House on the Hill’ but his stay has been a mixed scorecard as his administration implements the Bottom Up Economic Agenda (BETA), the linchpin of his 2022 campaign manifesto.

Various flagship projects in the five targeted areas of agriculture, health, housing, micro, small and medium enterprises and digital superhighway continue to be bogged down by lack of adequate funding, numerous scandals and legal challenges.

These challenges may have impeded the dreams that Dr Ruto had when he was sworn in that Tuesday, September 13, 2022. 

This dream was partly captured by his deputy, Rigathi Gachagua, who in his speech shortly after being sworn in and painting the gloomy picture of inheriting a dilapidated economy, noted that Ruto and his team had aspirations to liberate the country economically “and put it back to where President Mwai Kibaki left us 10 years ago”.

Analysts and economists note that two years on, Ruto is yet to find a rhythm and his hands-on approach could be his greatest undoing and nothing close to Kibaki’s style, who while firm with his Cabinet also gave ministers a free hand in running affairs at their ministries.

“Generally from the macroeconomic standpoint, the President seems to have been on trial and error, and many things do not seem to be sticking in a way that people can plan. This has cost the economy because investors are unable to predict and they start adopting the wait-and-see attitude,” says Patrick Muinde, an economist.

“Ultimately, where it matters for the people — the consumers, young people, employees and businesses – he is not making an impact. Two years is a long time and he could be running out of the window to make an impact for many Kenyans.”

He added that the Kenya Kwanza regime had gone on a borrowing spree, something it had harshly criticised the Jubilee Administration and at the same time continued with wasteful spending. Public debt stood at Sh10.56 trillion as of June this year, up from Sh8.58 trillion in June 2022, three months before Ruto took over in September.

He adds that in reducing the cost of other essentials such as the cost of petroleum products, factors beyond the control of government such as easing of global prices have been the major contributing factor rather than policies that the Kenya Kwanza administration has put in place.

“The cost of some basic goods has come down. The question is however whether this was due to policy intervention or purely because of luck due to weather.  The fertiliser subsidy has also faced the challenge of fake fertiliser. And hence, could we genuinely attribute the good production to him (President Ruto)? We are not seeing deliberate effort,” says Dr Muinde.

President William Ruto arrives at Berlin International Airport for for Annual Citizens Festival, Bundeslang. [PCS]

Muinde notes that Ruto’s hands-on approach to leadership could be an undoing for him, contradicting him with Kibaki’s approach where he gave his ministers a free hand in running their ministries. 

“When the President speaks, it is only him who appears to understand the policies, that is basically a bad policy. Nobody seems to understand many of his policies even as much as they try to defend it.”

“If the President is the one talking about specifics across different sectors such as the new higher education funding model, he appears not to be letting Cabinet secretaries drive their ministries and sectors and that could be the weakest links in his administration.”

Samuel Nyandemo, a lecturer of economics at the University of Nairobi, notes that President Ruto had so far failed to meet expectations of Kenyans, who have to grapple with high cost of essentials while many had seen their incomes reduce while others rendered jobless due to tough economic times.

“Generally the economy is worse. The cost of living has gone up drastically, the prices of essential goods and services have in some instances doubled and that puts the common Kenyans in a very desperate and awkward position. That means he has not performed to expectations,” he says,

“The cost of maize flour has gone down but this is a case where the weather has been favourable. There is also the issue of subsidised fertiliser, which was a positive sign but this was significantly watered down by the fake fertiliser that was given by the same government. This is likely to have long term effects particularly when it comes to this year’s harvest.”

He adds that the government had failed to cut on expenditure that is “not focused and does not support priority growth areas”.

Prof Nyandemo notes that while bringing on board to government Cabinet secretaries from the opposition might help in setting the country on the right path, he will need strategies that work.

“Ruto and his policy advisers will have to roll out strategies that will enhance sustainable growth. What we have seen so far is not sustainable. We need to see strategies that are likely to enhance long-term sustainable growth.”

“There is a need to boost private sector productivity. We need to see the government looking at the private sector as an engine of economic growth.

‘‘That will mean that we enhance macroeconomic stability, and lower interest rates so that the informal sector can thrive and promote growth.”

Yesterday, the Government Delivery Unit under Deputy Chief of Staff Eliud Owalo bought newspaper space to highlight key achievements and vital statistics on what has been achieved in the last two years of the Ruto administration, painting a rosy picture.

For instance, it outlined how the subsidised fertiliser programme has enhanced food production, thereby reducing food costs and also creating job opportunities in the agricultural sector. The scheme, through which the government says it has digitally registered 6.15 million farmers allowing them to access low-cost fertiliser at Sh2,500 this year down from Sh6,000 previously, was, however, hit by a Sh209 million fake fertiliser scam in April.

Tests by the Kenya Bureau of Standards confirmed that fake subsidised fertiliser known as GPC Plus Organics — packaged in 25kg bags — was in circulation following alarm bells rung by farmers who had bought the commodity.

National Cereals and Produce Board and Kenya Bureau of Standards officials and a businessman were subsequently suspended or arraigned in court.

The incidents brought to the fore how well-intentioned public programmes are used as conduits for quick riches by a few and put President Ruto under fresh scrutiny over his resolve to fight corruption.

Ruto also came into office pledging to lower the high cost of living but a decision to remove maize and oil subsidies sent prices of essential goods skyrocketing, sparking protests organised by the opposition Azimio la Umoja One Kenya.

Ruto defended the decision saying he was not keen on subsidising consumption but rather production.

According to the GDU, the interventions made in the maize sub-sector such as the subsidised fertiliser programme have increased production by 38.9 percent translating to 24 million 50 kg bags of maize from 61.74 million 50 kg bags of maize in 2022 to 85.7 million 50kg bags of maize in 2023.

It adds that the programme has reduced the shelf price of maize flour by Sh39.50 to Sh130.38 in 2024 from Sh169.9 in 2022 representing 23.3 per cent.

While the drop in food and oil prices has been reflected in declining inflation since January, most ordinary Kenyans are still unable to afford most essential goods due to, among others, poor economic performance and high taxes such as the housing levy.

A survey released last month by Sauti za Wananchi revealed that 50 percent of Kenyans are concerned with their economy compared to those in neighbouring countries and want President Ruto to tackle the cost of living.

The survey came after weeks of protests spearheaded by Gen Z which shook the Ruto administration to the core. While the started as a protest against proposals to raise taxes in the Finance Bill, 2024, they quickly morphed into calls for the president and his administration to quit over failure to deliver on his campaign promises, including dealing with the high cost of living, creating jobs for the youth and fighting corruption as questioned emerged over the opulence displayed some of those in his inner circle.

Ruto succumbed to pressure and shelved the controversial Bill and sacked his ministers except Prime Cabinet Secretary Musalia Mudavadi, among other concessions, after the youth stormed Parliament sending MPs scampering to safety through an underground tunnel.

Time bomb

However, the pressure continued until Ruto pulled a political masterstroke by turning to his nemesis-turned-ally ODM leader Raila Odinga resulting in the inclusion of ODM luminaries in a broad-based Cabinet.

This and the strong-arm tactics employed by the police, including abductions and use of live bullets, saw the youth take a strategic retreat but critics say their discontent with the way the country is being managed is a ticking time bomb and they are likely to keep President Ruto awake in what could be a defining third year in office.

The decision to reject the Finance Bill, 2024, and court decision to declare the Finance Act, 2023, unconstitutional will continue to present a headache for President Ruto as they threaten to derail some of his signature programmes such as on affordable housing and universal health coverage.

“The problems that he has had with the Finance Bill are self-inflicted. You cannot formulate a Finance Bill without public participation and listening to what Kenyans are saying. Some of the clauses are not anchored on law,” says Nyandemo.

“Having incorporated the ODM guys, there could be a bit of stability that may help stabilise his government and perhaps set the country on a growth path.”

President Ruto would hope new Finance Cabinet Secretary John Mbadi, the former ODM chairman, will find the magic and fund the programmes among other ambitious projects such as infrastructure against little wriggle room for borrowing and reduced ordinary revenue collections.

Mbadi has in the recent past said he would re-introduce some of the “good” proposals that were contained in the Finance Bill 2024, which many Kenyans took as a que to bring back the rejected proposals.

He has also this week said he plans to reduce Value Added Tax (VAT) rate to 14 percent from 16 percent, a move Muinde, the economist, said is a sentiment the market would welcome.

“The sentiments that are coming from the current CS appear to show a shift in thinking. We will have to wait to see whether it will be actualised. For the CS to propose some tax cuts to free money to consumers and businesses, that should be the right intervention and that can boost revenues in the medium and long term,” says Muinde.

“What the CS would be doing is inspiring confidence and assure Kenyans that there will be stability and they do not need to hoard money, they can now spend.”

President William Ruto is received by the Chinese Minister of Industry and Information Technology Jin Zhuanglong at the Beijing Capital International Airport in China. [PCS]

The courts are also still hearing a case involving the levying of Kenyans in formal employment to finance affordable housing while the rollout of Universal Health Coverage is still also embroiled in a court case, which the government lost after the three Bills anchoring its were also found unconstitutional for want of adequate public participation.

However, the government still remains upbeat saying it has so far increased the number of affordable housing units by 1,061 percent from 8,872 in 2022 to 103,000 in 2024, among other achievements.

On UHC, some of the achievements cited include recruitment of 78,000 community health promoters, bringing their number to 107,000 in 2024.

Another signature initiative by Ruto is the Hustler Fund, which State House says has so far disbursed 54.9 billion individual loans to 21.87 million people, in addition to helping individual borrowers save Sh3.1 billion.

However, while the Fund has proved handy to those at the lower end of the economic pyramid, it recently emerged that majority of the borrowers have defaulted in repaying their loans amounting to Sh11 billion.

“The problem we have had with the fund is that during the first round, 21 million people borrowed money but out of this number, 19 million disappeared with the money. Two million are borrowing regularly,” said Co-operatives and micro, small and medium enterprises CS Wycliffe Oparanya.

Ruto had in July also warned defaulters that they will face dire consequences.

“You cannot escape that. Even when you plan I am not sleeping, I am also planning on my end. Even if it were you, if a person has made away with Sh500 will you give them Sh20,000? You’re the one to decide if you want to borrow first pay the amount you went away with. You have nobody to blame, the opportunity you will destroy it yourselves.”

But as Ruto steps into the third year of his rule, he will also be keenly watching political developments, especially due to the increasing discomfort exhibited by DP Gachagua and his allies.

A major fallout will most likely distract him and thus torpedo his economic agenda.

It will, however, be interesting to watch whether Raila and his ODM lieutenants will help steady the ship of State even as talk of a possible alliance heading to 2027 continues. The third year could thus be the most defining of his presidency.