Cabinet doublespeak of growth on paper but struggles on the ground

President William Ruto after a Cabinet meeting at State House, Nairobi, on November 14, 2024. [PCS]

A dispatch from the presidency, following a Cabinet meeting on Thursday, November 14, presents a glowing picture of economic improvement in the country. According to the statement from State House, the welfare of Kenyans is said to have improved compared to 27 months ago when the administration took office.

Key indicators highlighted in the Cabinet report include a drop in maize flour (unga) prices, reduced inflation, increased labour exports, progress in transitioning to a new social health insurance system, and the production of enough sugar to meet local demand for the first time in our history.

Ironically, this optimistic narrative from the government coincided with a scathing statement from the Kenya Conference of Catholic Bishops, critiquing the country’s socio-economic state. The Bishops condemned what they termed a culture of leadership lies, corruption, self-serving politics, misplaced priorities, human rights violations, over-taxation without proper accountability, greed, and an insensitive and irresponsible government. They join a growing chorus of clergy voicing criticism of the administration.

The swift and intense reactions to the Bishops’ statement from various government agencies and paid State bloggers on social media suggest the critique struck a nerve at the heart of power. A few days ago, the chairman of the influential Budget and Appropriations Committee Ndindi Nyoro delivered a rare critique of the government. He said that it was not his place to tell people how well the economy is doing; instead, it is the people who should express how they feel in their pockets. This statement is particularly telling given that Mr Nyoro has been a staunch defender of the Kenya Kwanza administration’s economic policies.

The Cabinet report has sparked questions among citizens: Which economy was the president briefed on? Was the socio-economic welfare discussed in the Cabinet meeting reflective of the realities facing Kenyans, or does it belong to some other, perhaps fictional, nation? Why is it that only those in high government offices seem to perceive economic growth that the rest of the population neither sees nor feels?

Economic literature identifies key indicators of an economy’s overall health, including growth in Gross Domestic Product (GDP), inflation, unemployment, money supply, consumer spending, retail sales and existing home sales. Analysing these indicators using government data can help deconstruct the narrative of a robust economic welfare being advanced.

To start, while it is true that the price of unga has fallen in the retail market, attributing this entirely to the government’s fertiliser subsidy is questionable. The fertiliser subsidy programme was marred by allegations of fake fertiliser during the onset of the last rainy season. To date, no one has been held accountable for this. Furthermore, our agriculture is predominantly rain-fed, meaning production depends heavily on the adequacy of rainfall in any given season.

This raises an important question: how much of the current maize production—and agricultural output in general—can truly be credited to the fertiliser subsidy? Even if we grant the government the benefit of the doubt on the price of unga, other claims are less defensible. For instance, the Cabinet’s assertion about record sugar production is not supported by evidence from official government records.

Economic Survey

The 2024 Economic Survey reveals a concerning decline in the manufacturing sector’s net value addition to the economy. Most notably, sugar production dropped by 40.7 per cent in the 12 months leading to June 2023. A visit to supermarkets confirms that the dominant sugar brands on shelves are not from established local manufacturers but are instead supermarket-branded. This raises a critical question: is this sugar imported, or are we to believe that supermarkets are now major sugar producers?

Turning to GDP and inflation, a fitting quote comes from former Central Bank Governor Patrick Njoroge, who once reminded the Jubilee administration that “people do not eat GDP”. While the government reports a decline in inflation, experts caution that this may result from reduced consumer demand due to eroded purchasing power. Two weeks ago, this column explored the paradox of inflation decline that fails to improve household finances. Similarly, the apparent stability in dollar import cover and exchange rates is likely driven by subdued imports, which, in turn, reduce demand for dollars.

For the country’s youthful population, economic growth must seem like a cruel joke. On one hand, the government insists the economy is thriving; on the other, it boasts about securing menial jobs for its citizens in foreign capitals. According to the 2024 Economic Survey, the economy generated a net of only 209,900 formal sector jobs over the five years from 2019 to 2023. This means that, despite creating 122,800 formal sector jobs in the fiscal year 2022/23, many others were lost during the same period.

Meanwhile, the informal sector added a net of 1,634,000 jobs during this timeframe, underscoring the country’s steady transformation into a “hustler nation”. This aligns with the frustrations of Gen Z, as evidenced by protests in June and the anger expressed across social media. The much-touted Kazi Majuu programme—exporting labour abroad—can be interpreted as the government’s tacit admission that the local economy is failing to provide meaningful opportunities for its young, skilled workforce.

How then can the government simultaneously claim robust economic growth while admitting the local economy is incapable of creating sufficient opportunities?

The flurry of ill-advised taxes appears unchanged despite the change of guard at the National Treasury. Among the most notable proposals quietly reintroduced after public rejection of the Finance Bill 2024 are a withholding tax on infrastructure bonds and digital content taxes, both of which target foreign investors.

However, the real insight into the state of consumer finances lies in government tax collections. Ken Muthomi, writing in Capital Business, reported a 26.3 per cent drop in domestic VAT revenue in October. Similarly, excise duty collections from manufacturing and money transfers have declined. Other mainstream media outlets report a general slowdown in revenue growth for the July–October 2024 period compared to the same period in 2023.

This data is corroborated by reports of a sustained decline in mobile money wallet activity, as highlighted by M-Pesa statistics from Safaricom. While the taxman attempt to dismiss these findings in statements issued from State House, this is one metric that cannot be manipulated. On the streets, the lack of money circulating in the economy is palpable.

Emerging reports indicate that several State agencies have defaulted or fallen behind on repayments of government-guaranteed loans. Additionally, government institutions and county administrations are decrying delayed disbursements from the Treasury. Despite these financial struggles, the perception of a thriving economy appears to be confined to those in high government offices, who seemingly equate their personal excesses with a nationwide reality.

These leaders seem to forget that it was precisely this insensitivity to the public’s struggles that propelled them into power in 2022. This same wave of public dissatisfaction continues to unseat incumbents worldwide.