Budget will always be the biggest ever!

The reaction to the budget proposals for 2015/16 is not very different from the past ones. It’s as usual the biggest ever! For ordinary citizens, the concern is if there will be an increase in the cost of living. Most ordinary people, live from hand to mouth.

Every morning as you drive along Waiyaki Way at 7am, you meet a sea of people walking to work. You find another flow along Langata, Thika and Jogoo roads. The flow reverses in the evening as they walk home. Few would walk, if they could take a matatu or drive.

What does the budget mean to such ‘just in time’ labour force compared with entrepreneurs and elite reading this column?

First, to ordinary Kenyans, there is a dream that one day, that drudgery will end, the reason even private schools thrive in slums, the parents want their children to do better than themselves. Will the current proposals help them achieve his dream? For the well informed, and well to do, the concern might be if the luxuries from beer to wine or petrol will be taxed more.

Yet, for all our concerns, we are intertwined. The ordinary men and women who walk to work, ensure they save to get food and other necessities. By being cheap labour, they ensure it’s cheaper to produce your goods in industrial area, which is passed over to you as a consumer. That walking guy subsidises your life!

Let’s get into budget and see what was there for both. The National Treasury Cabinet Secretary Henry Rotich highlighted some of the broader concerns from terrorism, drought, weak global economy, which affect all of us irrespective of our status. We cannot ignore what happens beyond our borders.

In coming up with the budget, the Government was handed a great lifeline -low oil prices, which give us a lot of room for making policy changes like adding a levy of Sh3 per litre of petrol. That should not raise fares because they probably never fell with falling oil prices.

The focus has not deviated too much from the past. We have infrastructure, agriculture, security, health, energy (green energy), education, social protection and youth empowerment. Heavy projects from geothermal wells, SGR, roads, ports and Konza city which got Sh0.8 billion only. The budget writers are politically astute, instead of talking of Sh200 million, calling it Sh0.2 billion, it sounds more.

These sectors in addition to being the foundations of economic growth are also political assets. In the process of investing in them, lots of jobs are also created. The thinking is that if these sectors are put in order, they will have a multiplier effect through the economy and they affect all, irrespective of our status.

The projected growth of 6.5-7 per cent in 2015 was another uplifting news. The CS cited growth as bolstered by lower oil prices, higher public and private investment, increased consumer confidence and higher total factor productivity reflecting continued implementation of structural reforms and increased investment in health and education.

Treasury Bills

The specific focus on how to shore up the shilling was welcome news particularly the role of  International Monetary Fund (IMF) standby credit. Does that explain why IMF link gave the new CBK governor a head start? Raising CBR rate to 10 per cent to raise the cost of credit, but will shore up the shilling and reduce inflation. Policymakers are forever making trade-offs.

Other observations that made lots of economic sense include continued emphasis on women, youth and people with disability. This to me seems to the best time to be a woman in Kenya. The shift to IT platforms for procurement, filing taxes, applying for vital documents, is a step in making the government more efficient and responsive and needless to say reducing corruption. We should have shifted that way long time.

The ease of doing business has been a big concern for investors, both local and foreign. Setting specific targets on how to improve the business environment was great idea. Like other budgets, this was not balanced, there is a deficit. The proposal to make possible for mwanachi to buy government paper like Treasury Bills, by reducing lowest denomination to Sh3,000 was ingenious. Government will easily raise funds. This is likely to make more Kenyans invest in this almost risk free asset, and will give competition to banks. This could bring down the interests rates. Focus on external borrowing to reduce competition for credit between government and the private sector, which was pioneered by the Eurobond should become institutionalised. Use of private public partnership to reduce the deficit is a step in the right direction.

The budget, it seems is too protective of local industry. There are lots of taxes on imports to protect sugar and hides. Will this not make our industries uncompetitive globally? In agriculture sector the word revival was used twice and debt waiver once.

Economists dislike such terms for obvious reasons. Are we restarting what we abandoned decades ago? Can you recall Raymonds, KICOMI, RIVATEX and MOUNTEX? Beyond taking advantage of AGOA, such labour intensive industrial create lots of jobs. Korea used them before scaling up to cutting edge electronics. Can we skip this step, as we skipped fixed lines and credit cards?

A mature country

National Youth Service, started by Late Geoffrey Griffins seem to have become the darling of the Jubilee government and CS Rotich confirmed that by allocating Sh25 billion towards youth employment and re-engineering the NYS as a vehicle for transforming and empowering the Youth.

Why would economic stimulus program be closed? Thought that should continue or Keynesian ideas are no longer popular?

Jubilee government is also focusing on vulnerable members like orphans and elderly through cash transfers. Such programs, finally make Kenya look like a mature country that thinks not just of the elites but the less privileged.

Acknowledging that too much levies at country level would make business environment unconducive was a step in the right direction. Devolution should not make life hard for entrepreneurs who pay taxes.

Other highlights include rebates for hiring interns, one hopes it will not be abused. And less tax on beer from sorghum, cassava. Gaming is now recognized as an economic player, going by the number of casinos I see around. And capital gains tax removed (not surprising). Was looking for incentives for innovators and thinkers ... who will spawn new firms to pay more taxes and expand the economy. May be they are hidden somewhere in the 35 page document, where the word speaker is used 190 times...

—Dr Iraki is a senior lecturer, University of Nairobi School of Business